World Trade Organization: Issues in Dispute Settlement (Letter Report,
08/09/2000, GAO/NSIAD-00-210).

Pursuant to a congressional request, GAO reviewed the World Trade
Organization's (WTO) dispute settlement system, focusing on the: (1)
outcome and commercial impact of completed cases involving the United
States; and (2) major issues that have emerged in using the system.

GAO noted that: (1) overall, the results of the WTO's dispute settlement
process have been positive for the United States; (2) GAO's examination
of 42 completed cases involving the United States shows that most led to
changes in foreign laws, regulations, and practices that offer
commercial benefits to the United States; (3) conversely, none of the
changes the United States has made in response to WTO disputes have had
major policy or commercial impact to date, though the stakes in several
were important; (4) however, a ruling that U.S. tax provisions violated
export subsidy rules has potentially high commercial consequences, but
the United States has not fully determined how to comply with the
ruling; (5) in addition, WTO rulings have upheld major trade principles
important to the United States, such as requirements that imported goods
must be treated in the same way as domestic goods in applying internal
taxes and regulations; (6) four major issues surrounding the dispute
settlement system have emerged; (7) these issues are: (a) how the
dispute settlement system has affected U.S. sovereignty; (b) to what
extent WTO members found to be in violation of rules are complying with
WTO rulings; (c) how quickly the system resolves disputes; and (d) how
open the WTO's proceedings are; (8) concerns over sovereignty have
centered on whether rulings would weaken U.S. protections against unfair
trade and on health, safety, and the environment; (9) so far, this
possibility has not proved to be the case, but concerns remain; (10)
with regard to compliance, members have generally changed their
practices to comply with WTO rules, and the rate of compliance with
decisions in U.S. cases is 75 percent, slightly better than that under
the General Agreement on Tariffs and Trade; (11) further, while many
U.S. complaints were resolved quickly, most complaints that went through
the WTO panel or appellate process took longer than called for in the
timetables set forth in the WTO agreements; (12) although the dispute
settlement system has become more open and transparent since it was
established in 1995, the public still has limited information about and
input into the organization's proceedings; and (13) the United States
has met resistance from other WTO members in seeking greater openness in
the process.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-00-210
     TITLE:  World Trade Organization: Issues in Dispute Settlement
      DATE:  08/09/2000
   SUBJECT:  Dispute settlement
	     Restrictive trade practices
	     Foreign trade agreements
	     Foreign trade policies
	     International organizations
	     International economic relations
	     Tariffs
	     International trade regulation
IDENTIFIER:  WTO Dispute Settlement System

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GAO/NSIAD-00-210

Appendix I: Summaries of 42 World Trade Organization Dispute Settlement
Cases

30

Appendix II: Commercial Significance of 42 U.S. WTO Dispute
Settlement Cases

96

Appendix III: Objectives, Scope, and Methodology

107

Appendix IV: GAO Contact and Staff Acknowledgments

110

112

Table 1: Completed WTO Dispute Settlement Cases Involving
the United States, 1995 Through March 16, 2000 30

Table 2: Commercial Outcome of WTO Dispute Settlement Cases
Involving the United States, 1995 Through March 16, 2000 96

Table 3: Commercial Significance of Completed U.S. Cases in
the WTO, 1995-2000 98

Figure 1: Flow Chart of WTO's Dispute Settlement Process 6

Figure 2: Areas Involved in 25 WTO Cases in Which the
United States Challenged Foreign Trade Practices 10

Figure 3: Areas Involved in 17 WTO Cases in Which Other
WTO Members Challenged the United States 12

Figure 4: Compliance With WTO Decisions in 42 Completed
U.S. Cases 22

ATC World Trade Organization Agreement on Textiles and Clothing

DSB Dispute Settlement Body

EU European Union

FSC Foreign sales corporation

GATT General Agreement on Tariffs and Trade

NAFTA North American Free Trade Agreement

TRIPS Agreement on Trade-Related Aspects of Intellectual Property

TRQ Tariff-rate quota

USTR Office of the U.S. Trade Representative

WTO World Trade Organization

National Security and
International Affairs Division

B-285799

August 9, 2000

The Honorable Bill Archer
Chairman, Committee on Ways and Means
House of Representatives

Dear Mr. Chairman:

U.S. participation in the World Trade Organization (WTO) reached the
5-year mark in 2000. The WTO was established through the Uruguay Round of
international trade negotiations on January 1, 1995, replacing the General
Agreement on Tariffs and Trade. Membership in the WTO has grown to 137
members, up from about 90 members in September 1986, at the start of the
Uruguay Round. The WTO provides the institutional framework for the
multilateral trading system, administers rules of international trade, and
provides a forum for conducting trade negotiations. It also establishes a
quasi-adjudicative dispute settlement system, which has come to be seen as
the linchpin for the rules-based system of international trade. The WTO
dispute settlement system has also become a lightning rod for those
concerned about the direction of the trading system in an era of
accelerating globalization.

This is the second report in response to your request that we conduct a
review of the WTO's dispute settlement system. Our first report provided
information on how WTO members have used the new system over the past 5
years.1 In this report, we examine (1) the outcome and commercial impact of
completed cases involving the United States and (2) the major issues that
have emerged in using the system. This report supplements the observations
we provided you on these issues in June 2000.

Overall, the results of the WTO's dispute settlement process have been
positive for the United States. Our examination of 42 completed cases
involving the United States shows that most led to changes in foreign laws,
regulations, and practices that offer commercial benefits to the United
States. Conversely, none of the changes the United States has made in
response to WTO disputes have had major policy or commercial impact to date,
though the stakes in several were important. However, a ruling that U.S. tax
provisions violated export subsidy rules has potentially high commercial
consequences, but the United States has not fully determined how to comply
with the ruling. In addition, WTO rulings have upheld major trade principles
important to the United States, such as requirements that imported goods
must be treated in the same way as domestic goods in applying internal taxes
and regulations.

Four major issues surrounding the dispute settlement system have emerged.
These issues are (1) how the dispute settlement system has affected U.S.
sovereignty, (2) to what extent WTO members found to be in violation of
rules are complying with WTO rulings, (3) how quickly the system resolves
disputes, and (4) how open the WTO's proceedings are. Concerns over
sovereignty have centered on whether rulings would weaken U.S. protections
against unfair trade and on health, safety, and the environment. So far,
this possibility has not proved to be the case, but concerns remain. With
regard to compliance, members have generally changed their practices to
comply with WTO rules, and the rate of compliance with decisions in U.S.
cases is 75 percent, slightly better than that under the General Agreement
on Tariffs and Trade. Further, while many U.S. complaints were resolved
quickly, most complaints that went through the WTO panel or appellate
process took longer than called for in the timetables set forth in the WTO
agreements. Although the dispute settlement system has become more open and
transparent since it was established in 1995, the public still has limited
information about and input into the organization's proceedings. The United
States has met resistance from other WTO members in seeking greater openness
in the process.

The WTO provides the institutional framework for the multilateral trading
system. The WTO is the successor of the General Agreement on Tariffs and
Trade (GATT), which was created by post-World War II U.S. and European
leaders who believed that open markets and a rules-based system of trade
would promote international stability and prosperity and avoid damaging
trade disputes. The 1994 Uruguay Round agreements, which created the

WTO, vastly expanded the scope of multilateral trade rules by strengthening
disciplines in traditional trade areas and broadening coverage to areas such
as services and intellectual property. It also established a new dispute
settlement system,2 replacing the procedures that had gradually emerged
under GATT. While the dispute settlement system facilitates the resolution
of specific trade disputes, it also serves as a vehicle for upholding trade
rules and preserving the rights and obligations of WTO members under the WTO
agreements. WTO dispute settlement is central to U.S. efforts to monitor and
enforce trade agreements--a major focus of U.S. trade policy.

Unlike the GATT, the WTO dispute settlement system discourages stalemate by
not allowing parties to block decisions, and establishes a standing
Appellate Body, which helps make the system's decisions more stable and
predictable. WTO dispute settlement rules also set time limits for each step
in the dispute settlement process, including (1) consultations, (2) panel
review, (3) Appellate Body review, and (4) implementation of rulings (see
fig. 1). Under these timetables, some of which are maximums and others
minimums, WTO disputes that go all the way through the system should be
resolved within approximately 2-1/2 years from the time an initial request
for a consultation is filed through full implementation of a WTO Appellate
Body ruling--a minimum of 17 months for the consultation and adjudication
phases (if an appeal is involved) and up to 15 months to implement the final
ruling. The dispute settlement process is administered by the Dispute
Settlement Body (DSB), which is composed of representatives of all WTO
members.

Source: GAO analysis.

ï¿½ Consultations. Before members take any other actions, the dispute
settlement process calls on member countries to try to resolve disputes in
discussions among themselves. Up to 60 days are typically allotted to this
initial stage, known as "consultations."

ï¿½ Panel adjudication. If the parties to a dispute cannot reach a
satisfactory resolution on their own, the complaining member is entitled to
have an impartial panel of experts convened on an ad hoc basis to adjudicate
the matter. The panel is composed of three, or by agreement of the parties,
five, well-qualified governmental or nongovernmental persons with experience
in the trade policy area. The WTO Secretariat proposes candidates to the
panel,3 and parties to the dispute may oppose nominations only for
compelling reasons. Panelists are normally appointed by agreement of the
parties and, once appointed, they serve in their individual capacities, not
as government representatives. The panel phase may take 30 or more days for
the panel to be appointed, plus 6 to 9 months for the panel to issue its
findings in report form. Within 60 days, unless appealed or member countries
decide by consensus to reject it, the report becomes a WTO ruling.

ï¿½ Appellate Body adjudication. Either side in a dispute can appeal the
panel's ruling. The seven members of the standing Appellate Body are broadly
drawn from WTO member countries and are to be people with demonstrated
expertise in law, international trade, and the WTO agreements; three
Appellate Body members consider each appeal. Normally, the Appellate Body
should complete its consideration of the appeal within 60 to 90 days. The
Appellate Body ruling, along with the panel ruling, as amended, is then
adopted by the WTO within 30 days, unless member countries decide by
consensus to reject it.

ï¿½ Implementation. Within 30 days of the ruling's adoption, a country that
loses a case must state its intention regarding implementation of the
recommendations of the panel or appellate ruling. Losing parties are
encouraged to comply with WTO rulings. However, they may accept retaliation
or provide compensation to the plaintiff as an interim measure. If complying
with the recommendation proves immediately impractical, the country may
request or be given an extension for a "reasonable period of time" to do so.
This period is normally not to exceed 15 months. The implementation period
can be set by agreement to a date proposed by the losing party, by mutual
agreement of the parties, by binding arbitration or, in cases involving
subsidies, by the panel.

ï¿½ Retaliation in the event of noncompliance. If a member found to be
violating WTO commitments does not conform to the WTO ruling or provide
compensation within the established implementation period, the complaining
party may seek authorization to retaliate. This shall be granted within 30
days after the implementation period ends, unless there is a consensus
against doing so. Retaliation takes the form of suspending negotiated
concessions or other WTO obligations. For example, a country could raise
tariffs on the noncomplying country's goods. The level of retaliation must
also be authorized and is to be equivalent to the amount of harm suffered by
the complaining country. In case of disagreement regarding the level of
retaliation, the original panel may be asked to arbitrate and issue a
binding determination to be completed within 60 days from the end of the
implementation period.

The United States has generally benefited from its experience with the WTO
dispute settlement system, based on our analysis. We examined 42 completed
WTO dispute settlement cases in which the United States was either plaintiff
or defendant4 and focused on the nature of the case, the commercial
significance of the outcome, and the trade principles involved. (See app. I
for a brief description of each case.) The majority of the 25 cases in which
the United States was the plaintiff resulted in commercial benefits through
greater market access or stronger intellectual property protection. In the
17 cases in which the United States was a defendant, the trade policy and
commercial consequences of nearly all the challenges so far have been
limited. The exception is a European Union (EU) challenge to the U.S.
foreign sales corporation tax provisions (case 40), where the WTO ruled that
the U.S. provisions constituted a prohibited subsidy. The United States has
also benefited from WTO rulings that upheld important principles set forth
in the WTO agreements.

Cases It Has Filed

The United States has achieved benefits in most of the cases it has brought
to the WTO dispute settlement process. The United States brought 25 of the
42 completed cases we examined, primarily in the areas of agriculture and
sanitary and phytosanitary5 measures, intellectual property rights, and
taxes and subsidies (see fig. 2).

Legend
Ag/SPS = Agriculture, and sanitary and phytosanitary measures (human,
animal, and plant health)
IPR = Intellectual property rights (such as patent protection)
TRIMS = Trade-related investment measures (such as countries requiring that
foreign firms limit their imports to the amount they export).

Note 1: "Antidumping" refers to additional duties imposed on imports when
dumping, or sales at below home-market prices, is found.

Note 2: "Other" includes cases involving barriers in the Japanese film
market, the EU's reclassification of certain computer equipment for tariff
purposes, and India's restrictions on imports it claimed were based on
balance-of-payments grounds.

Source: GAO analysis.

Of the 25 cases the United States filed with the WTO, 19 resulted in some
agreed change in foreign laws, regulations, or practices. These have
included removal of trade barriers, reductions in subsidies, and changes in
intellectual property laws. As appendix II shows, 14 of the 25 cases
resulted in commercial benefits for the United States.

Implementation of the WTO panel ruling in four disputes upholding U.S.
complaints is either not yet complete or was contested. These four cases
involve EU restrictions on banana imports and imports of hormone-treated
beef, where compliance has not been attained;6 Australian subsidies to
automotive leather manufacturers, where compliance was disputed but resolved
through negotiations; and Mexican antidumping measures on high fructose corn
syrup, where Mexico has until September 22, 2000, to comply.

In two cases, the United States lost its challenge. Both cases involved
important markets for U.S. exports. In the Japanese film case (case 19), the
United States challenged Japanese government practices that it argued
fostered barriers to access and distribution of U.S. photographic film in
Japan's approximately $2.5 billion to $3 billion market. The WTO ruled
against the United States, finding that it had not demonstrated that Japan
had nullified and impaired U.S. benefits or violated specific WTO
commitments. In the second case, the EU increased tariffs on certain
computer equipment by changing the classification of these products
(case 27). At the time, U.S. producers accounted for half of the $5-billion
European market. The WTO ruled that the EU did not violate its obligations
by changing the classification of these products since its WTO commitments
did not specifically identify them in a particular tariff category. However,
the Information Technology Agreement reduced tariffs on these products to
zero, mitigating the impact of the adverse ruling.

Date

Other WTO members challenged U.S. practices in 17 cases, primarily involving
antidumping, textiles, and the section 301 trade law7 (see fig. 3). Of the
17, a WTO panel or the Appellate Body ruled against the United States in 6
cases, in favor in 1 case, and in 10 cases the dispute was resolved prior to
a panel decision. As discussed in more detail later, the changes to U.S.
policy in response to these cases have been relatively minor.

Legend

Ag/SPS = Agriculture, and sanitary and phytosanitary measures (human, animal
and plant health)
IPR = Intellectual property rights (such as patent protection)
TRIMS = Trade-related investment measures (such as countries requiring that
foreign firms limit their imports to the amount they export).

Note 1: Section 301 of the 1974 Trade Act addresses foreign unfair trade
practices affecting U.S. exports of goods or services, and intellectual
property protection.

Note 2: "Antidumping" refers to additional duties imposed on imports when
dumping, or sales at below home-market prices, is found.

Note 3: "Other" includes an EU challenge to certain extraterritorial aspects
of U.S. sanctions on Cuba.

Source: GAO analysis.

While some of the 17 cases have also had high commercial stakes, the
outcomes of all except one have had limited or no commercial effect. For
example, in a case challenging U.S. antidumping duties on imports of urea
(primarily used as a fertilizer) from the EU (case 28), the United States
removed the duties after it found that U.S. industry was not interested in
maintaining them. The one case with a potentially very high commercial
impact involves U.S. tax exemptions for foreign sales corporations
(case 40). The WTO found that the exemptions were prohibited export
subsidies and violations of U.S. commitments. The United States has until
October 1, 2000, to comply with the WTO ruling, but has not yet fully
determined how it will implement it.

In the disputes involving the United States, WTO decisions upheld trade
principles important to the United States. These rulings in the WTO's first
5 years have helped to establish a more consistent interpretation of WTO
agreements and members' obligations and have reaffirmed long-standing trade
principles.8

ï¿½ The United States successfully challenged India's quantitative
restrictions and import bans on 2,700 products that India justified under
WTO balance-of-payments provisions (case 35).9 The WTO panel and the
Appellate Body found that India's balance-of-payments situation did not
justify the measures, and India agreed to phase out these restrictions. The
decision is an important signal to other countries that the WTO will not
permit the inappropriate use of balance-of-payments provisions to restrict
trade, according to USTR.

ï¿½ Another long-standing trade principle--national treatment--generally
requires that foreign goods should receive treatment no less favorable than
that accorded to domestic goods. Under this principle, the United States
successfully brought WTO challenges against both Japan's and Korea's
taxation of distilled spirits (cases 4 and 32). In both countries, certain
domestically produced liquor received significantly lower tax treatment than
other varieties that were primarily imported. The WTO found that this
treatment was discriminatory because the products were either "like" or
"directly competitive" with the domestic products. Both countries complied
with the decisions by equalizing their tax rates on foreign and domestic
distilled spirits. A case regarding Turkey's differential taxes on foreign
and domestic films also involved national treatment issues (case 18). The
U.S. film industry noted that Turkey is the largest market for films in the
Middle East, with 1999 revenues of $23 million. Turkey agreed to equalize
its tax rates, and a U.S. film industry association cited this successful
resolution of the dispute as useful in discussions with other countries with
similar measures.

Even in cases in which the United States did not prevail, important trade
principles were upheld. In a case involving wool shirts from India (case
12), for example, the WTO Appellate Body ruled that a U.S. import restraint
was improper but upheld the principle that the burden of showing that the
import restraint was inconsistent with WTO principles was on the complaining
party, which in this case was India.

Several important concerns have emerged regarding the WTO dispute settlement
system. Some of these issues were identified during the Uruguay Round
negotiations.10 Other issues were identified by trade experts and other
interested parties based on experience during the first
5 years of WTO dispute settlement. They include (1) the question of how the
dispute settlement system has affected U.S. sovereignty, (2) the extent to
which members found to be in violation of WTO obligations are complying with
the WTO's rulings, (3) the timeliness of the system for resolving disputes,
and (4) the transparency of the WTO's proceedings.

The nature of the WTO dispute settlement system has been the subject of
long-standing concern about how its decisions will affect U.S.
sovereignty.11 Our review of the 42 completed dispute settlement cases
involving the United States focused on sovereignty issues in three areas. We
found
(1) the United States has benefited from protections that are built into the
WTO dispute settlement system and U.S. implementing legislation that
preserve the U.S.' flexibility in responding to WTO rulings; (2) the United
States has so far withstood challenges to the use of domestic trade law to
act against foreign unfair trade practices, although more are in the
pipeline; and (3) WTO rulings to date against U.S. environmental measures
have not weakened U.S. environmental protections, but environmental groups
remain concerned over the impact of these rulings and the system's capacity
to handle such complaints.

Flexibility in Responding to WTO Rulings Protects U.S. Sovereignty

As an intergovernmental forum, the WTO makes rulings that are fundamentally
different in character from rulings by U.S. courts. The WTO itself cannot
"strike down" U.S. laws, as U.S. federal courts can, nor can it require the
United States to modify domestic laws, regulations, or policies, such as its
environmental laws, even if they conflict with WTO trade rules. Instead, WTO
rulings identify aspects of the WTO member's policy that conflict with WTO
rules and recommend that the member bring them into conformity.

Under WTO dispute settlement rules, compliance is the preferred way of
responding to an adverse WTO ruling. However, a member may decide not to
comply and either offer equivalent compensation or face foreign retaliation.
These options, which are considered under the dispute settlement rules to be
temporary, were designed to protect sovereignty.

Another sovereignty protection is that both panels and the Appellate Body
are expressly prohibited from adding to or detracting from the rights and
obligations provided in the WTO agreements. An innovation that the United
States sought in the Uruguay Round--the establishment of a standing
Appellate Body--has proved to be an important check on the system during the
WTO's first 5 years, substantially revising panel rulings the United States
argued had raised sovereignty problems. For example, in the Venezuela gas
and shrimp-turtle cases (cases 1 and 25) that challenged U.S. environmental
regulations, the Appellate Body modified WTO panel rulings that had, in the
U.S. view, unacceptably limited the right of members to take measures to
protect the environment. The Appellate Body played a similar role in the
U.S. case against the EU's ban on hormone-treated beef (case 8) when it
affirmed that a member retains the right to set its own levels of human
health protection, provided that the member complies with WTO requirements
in promulgating measures to achieve that level.12

In joining the WTO, however, the United States committed itself to abide by
the WTO rules. The United States played a major role in shaping those rules
through its active participation in eight rounds of multilateral trade
negotiations over a 50-year period. These and any new WTO rules are only
established after a consensus is reached among WTO member governments to do
so. The United States maintains that it has the right not to comply with WTO
rulings. However, the United States recognizes that it may bear a penalty
for not complying with WTO rulings, both in the form of retaliatory duties
on U.S. exports and in terms of its reputation as a key player in the world
trading system.

WTO dispute settlement rulings against the United States are not implemented
unless and until Congress or the executive branch takes action to do so
through legislation, regulation, or other administrative processes.13 USTR
is required to consult with Congress, statutory private sector trade
advisory committees, and state officials before U.S. agencies can make
changes in U.S. agency regulations or practices in response to a WTO ruling.
The head of the relevant agency must also provide an opportunity for public
comment.14

As a result of the 17 WTO cases against the United States, one U.S. law, two
regulations, and one set of guidelines have been changed. To date, the
changes have been relatively minor. For example, in May of this year, the
United States amended a 1996 law for determining the country of origin of
U.S. textile and apparel imports, in response to a WTO case filed by the EU
(case 31). The amendment changed the country of origin of certain fabrics
including silk, and of certain goods such as scarves, from where the raw
fabric was made to where the product was both dyed and printed with two
additional finishing operations.15 According to Department of Commerce
statistics, the affected EU exports to the United States are relatively
small.

WTO Cases Challenging U.S. Domestic Trade Law

In implementing the Uruguay Round agreements, Congress sought assurance that
the WTO's new dispute settlement mechanism would not undermine U.S. ability
to act against foreign unfair trade practices, particularly under section
301 of the Trade Act of 1974 and under statutes designed to counter foreign
subsidies or dumping (sales of products abroad at prices below those charged
in the home market).

Despite three WTO complaints involving section 301,16 the United States has
continued to use the law to address foreign trade barriers. The average
number of section 301 investigations that the United States initiated
actually increased from 1995 through 1998 compared to the previous
5 years.17 However, the United States is referring significantly more cases
to the WTO for resolution now as compared to the 1990 through 1994 period.18
These cases often involve new trading rules, such as those on intellectual
property, agricultural subsidies, and trade-related investment. Three
challenges of U.S. section 301 actions have been brought before the WTO, but
only one resulted in a WTO ruling, which upheld the ability of the United
States to use the law consistent with WTO requirements.

ï¿½ A challenge launched just shortly after the WTO began operating involved a
request by Japan for WTO consultations in response to a U.S. announcement of
retaliatory duties under section 301 on $5.9 billion worth of Japanese auto
imports (case 3). Japan questioned the U.S. action's consistency with WTO
rules since the United States acted without WTO authorization, but a
bilateral deal was reached on the day set for the United States to actually
impose the duties, and Japan did not pursue the matter further in the WTO.

ï¿½ The EU made a largely unsuccessful challenge against U.S. section 301 and
related provisions, alleging that aspects of the U.S. legislation
effectively required the USTR to make decisions about foreign trade barriers
before a WTO determination on whether a foreign trade practice had violated
WTO rules or whether retaliation was warranted (case 42). The WTO panel
found that though on its face the statute conflicted with WTO requirements,
it did not violate WTO rules

because of U.S. assurances that the United States would abide by WTO
timetables and decisions in implementing the law.19

Only one of the four cases against U.S. antidumping measures resulted in a
WTO ruling, and none of the cases against U.S. antidumping measures were
seen as resulting in weakened U.S. protections. In the case involving a
ruling, Korea challenged a U.S. Department of Commerce decision not to
revoke an antidumping order on semiconductors (case 36). The WTO panel
rejected almost all of Korea's arguments. However, it ruled against the
United States on one of the Korean complaints. In response to this panel
ruling, Commerce modified one of its antidumping order review procedures.
After completing a review under the new procedures, Commerce determined that
the antidumping duties should remain in effect. According to Commerce
officials, the change in procedures does not weaken the U.S. antidumping
regime.

A number of challenges to U.S. antidumping and countervailing duties
(tariffs levied to offset government export subsidies) that were beyond the
scope of our study are in the pipeline, mostly in the steel sector. However,
it is too early to predict the commercial or policy consequences of these
cases for U.S. sovereignty. The pending challenges include challenges to
U.S. antidumping measures on imports of Korean stainless steel and Japanese
hot rolled steel, a U.S. countervailing duty action against lead bar and
steel imports from the United Kingdom, and challenges by the EU and Japan to
the 1916 Antidumping Act,20 which provides for antitrust-like remedies
(treble damages) against price underselling of foreign goods.

WTO Cases Involving U.S. Health, Safety, and Environmental Measures

Concerns have also been expressed by Members of Congress, some legal
experts, and interest groups that the WTO dispute settlement system may
interfere with the U.S.' ability to set and enforce health, safety, and
environmental measures. Such concerns surfaced in two U.S. cases dealing
with environmental issues, both of which the United States lost.

WTO members may claim exceptions to WTO rules in certain circumstances to
set and enforce health, safety, and environmental measures. These
exceptions, found in GATT article XX, protect U.S. sovereignty. When WTO
members challenged two U.S. environmental measures as discriminatory, the
United States acknowledged that it treated foreign products differently but
said these differences were based on valid policy concerns, not disguised
protectionism. Specifically, the United States argued as follows:

ï¿½ In the gasoline imports case brought in 1995 against the United States by
Venezuela and Brazil (case 1), the United States said that the Environmental
Protection Agency was concerned that it would be difficult to enforce the
same rules for gasoline domestic products and imports in setting baselines,
which are used to assess refiners' performance in meeting the goals of the
1990 Clean Air Act.21

ï¿½ In the 1996 shrimp-turtle case brought by four Asian countries, the United
States argued (case 25) that shrimp trawling was among the leading factors
driving sea turtles to the brink of extinction. The United States noted that
the U.S. law in question22 was designed to encourage nations to require
comprehensive use of turtle extruder devices, which reduce turtle deaths.
Since not all nations had adopted such requirements, the United States
banned imports of shrimp from those that had not.

Despite the U.S. arguments in these cases, the WTO ruled that the U.S.
measures violated WTO obligations. Nevertheless, the U.S. environmental
objectives were maintained.

ï¿½ First, the WTO Appellate Body found the U.S. measures were eligible for
one of the exceptions enumerated in article XX, after the initial panel had
ruled they were not. This means that the United States is allowed to take
these kinds of trade measures to attain its U.S. environmental objectives of
conserving air quality and protecting sea turtles and still meet its WTO
obligations, so long as they are consistent with the introductory clause of
article XX. The clause requires that measures not be a means of arbitrary or
unjustifiable discrimination or a disguised restriction on international
trade.

ï¿½ Second, the United States was ultimately able to comply with the WTO
rulings by making changes in the way the affected laws are administered.
Agency officials say these changes do not compromise their environmental
objectives. In a case brought by Venezuela and Brazil (case 1), the
Environmental Protection Agency changed a regulation implementing the 1990
Clean Air Act pertaining to the cleanliness of conventional gasoline in
1997. The change gives foreign suppliers the option of using a baseline for
calculating gas cleanliness, based on their own performance rather than on
an agency-established baseline (this treatment was already afforded to
domestic suppliers). The Environmental Protection Agency also put in place a
mechanism to offset any deterioration in the overall cleanliness of gas
imports. In the shrimp-turtle case, the United States took steps to make the
process it uses to certify that countries have comprehensive sea turtle
conservation programs fairer and more open. It also began pursuing
negotiations with countries toward adoption of multilaterally
agreed-upon sea turtle conservation measures. However, environmental groups
are still concerned about another change in U.S. guidelines made during the
shrimp-turtle case that allows shrimp to be imported into the United States
from countries that do not have comprehensive turtle conservation
requirements.23

Beyond the outcome of these specific cases, concerns remain about the
dispute settlement system's capacity to deal with complex regulatory issues.
Dispute settlement cases involving health, safety, and environmental matters
necessitate that WTO panels balance trade against other concerns and weigh
scientific and technical evidence. This raises two issues: (1) whether the
WTO is the appropriate forum for such decisions and (2) whether the WTO is
adequately equipped to make such decisions. Regarding the first issue, some
U.S. health, consumer, and environmental organizations say that decisions
involving balancing trade with other concerns are inherent policy choices
best made by national governments and their citizens, not the WTO. In this
regard, some maintain that as an organization dedicated to reducing trade
barriers, the WTO cannot impartially address issues that involve policy
goals that may conflict with free trade. For example, some consumer and
environmental groups maintain that WTO dispute settlement panels in these
U.S. cases did not show sufficient deference to domestic regulators'
enforcement concerns. Regarding the second issue, there is concern that WTO
panels, which are generally composed of trade officials, may lack or fail to
seek the scientific and other technical expertise needed to fully evaluate
complaints over complex factual matters such as health risks or alternative
means of attaining regulatory goals.24 While U.S. courts are often asked to
review such issues, some nongovernmental organizations and legal experts say
U.S. courts are better equipped to do so than the WTO dispute settlement
process, which in their view lacks sufficient procedural protections to
ensure impartiality and due process.

Remain

Compliance with WTO rulings has generally been achieved in the 42 completed
cases we examined. In 4 cases, however, it has been alleged by the
complaining countries that some countries, including the United States, have
failed to fully comply with the WTO rulings. In other cases, countries have
complied with the rulings in ways that provide limited improvements in
market access. The United States has proposed changes to improve compliance
with WTO rulings.

In disputes involving the United States, WTO members have complied with WTO
rulings about 75 percent of the time (see fig. 4). This is somewhat better
than the overall rate of member compliance with WTO rulings
(65 percent). It is also better than the average rate of full compliance
under the GATT dispute settlement mechanism during its first 40 years of
operation (67 percent).25

Source: GAO analysis.

Failure to comply with the WTO ruling was alleged to have occurred in four
of the cases we examined. First, U.S. compliance is currently being
contested in a case involving a U.S. antidumping order on Korean
semiconductors (case 36). Although the United States changed its antidumping
procedures as a result of the WTO panel ruling, Korea claims the change does
not fully comply with the ruling. Second, the EU chose not to lift its ban
on beef treated with growth hormones to comply with WTO rules and instead
accepted retaliation (case 8). Third, in a case involving

the EU's banana import regime (case 6), the WTO subsequently authorized the
United States to retaliate.26 Fourth, in a case brought by the United States
against Australian subsidies to an automotive leather manufacturer (case
24), the WTO panel ruled that Australia had not complied with its ruling,
but the United States and Australia reached a negotiated solution.

Compliance with WTO panel rulings does not always guarantee the desired
outcome, because WTO members can sometimes comply with WTO rulings in ways
that remove discrimination but do not liberalize market access. In the 1997
Korean liquor tax case (case 32), for example, Korea equalized barriers,
rather than lowering them, by raising taxes on its domestic products to the
level of taxes on imports. In the case involving Canada's restrictions on
imports of U.S. magazines (case 10), Canada complied with the ruling but
then introduced legislation that, if enacted, would have placed new
restrictions on advertising by foreign magazine publishers. Canada and the
United States ultimately resolved the dispute through additional bilateral
negotiations that resulted in an agreement easing the Canadian restrictions
and lowering other barriers.

U.S. proposals to improve compliance with WTO rulings include clarifying
procedural ambiguities and allowing more aggressive U.S. retaliation in
cases where compliance is not attained.

ï¿½ The United States and other WTO members are considering procedural changes
to the agreement establishing the dispute settlement mechanism to avoid a
situation in which the timing of authorization to retaliate and the review
of the sufficiency of compliance measures may

be in conflict,27 an issue that arose in the EU banana regime case.28 In
the meantime, procedural ambiguities about the timing of these procedures
have generally been resolved by agreement among the parties to disputes.29

ï¿½ The Trade and Development Act of 200030 requires the U.S. Trade
Representative to periodically rotate the list of products subject to
retaliation if implementation of a WTO ruling is not imminent.31 U.S.
legislators introduced this provision in the act, referred to as a
"carousel," because initial U.S. retaliation failed to prompt the EU to
comply with WTO rulings on the EU's ban on hormone-treated beef and EU
banana regime cases. The U.S. Trade Representative is considering changes to
the U.S. retaliation list in both cases to meet the provisions of the act.
However, the EU has recently questioned the carousel provision's consistency
with U.S. WTO obligations by requesting WTO dispute settlement consultations
with the United States.

Ultimately, compliance with WTO dispute settlement procedures must be
evaluated on a relative scale, since compliance cannot be mandated, and
retaliation cannot necessarily compel countries to change. Indeed, some
business and consumer interests question the wisdom of U.S. retaliation,
because it restricts trade and hurts consumers. At a more fundamental level,
most legal experts say it is unrealistic to expect the system to produce 100
percent compliance, given its design. Several international legal experts
suggested to us that diplomacy offers the best hope of resolution of
politically sensitive disputes as was done, for example, in the case of the
EU challenge to the U.S. Helms-Burton law, which codified U.S. economic
sanctions against Cuba (case 16). They also said that retaining the option
of noncompliance (through acceptance of retaliation or provision of
compensation) is an important safety valve for broader acceptance of the
WTO's essentially automatic dispute settlement system.

While WTO disputes have generally been resolved within several months of the
established timetables,32 the timeliness of WTO dispute resolution remains a
concern to U.S. businesses interested in achieving the negotiated benefits
of the WTO agreements. Although many U.S. complaints were settled quickly,
of the 15 U.S. complaints we examined that went to adjudication, about 80
percent are taking longer than the established timetables call for. However,
the time given countries to implement WTO rulings is generally within
established guidelines.

ï¿½ Many of the U.S. cases--20 of 42--have been resolved quickly by the
parties to the dispute. For example, all but one (India patent
mailbox-case 21) of the five intellectual property rights cases were
resolved without resort to a panel. On average, the 10 cases the United
States initiated that were resolved prior to a panel ruling took about 11
months to resolve. The 10 cases brought against the United States that were
resolved prior to a panel ruling were resolved even faster--4 months on
average.

ï¿½ The 15 cases the United States filed that went to panel and/or appellate
adjudication resulted in adoption of final WTO rulings within an average of
21 months of the date of the initial U.S. request for consultations. This is
longer than the 17 months in the agreed timetables for the consultation and
adjudication processes. Only 3 of the 15 U.S. cases resulted in a ruling
within 17 months. Difficult cases, such as those involving the India
balance-of-payments situation, Canada's dairy subsidies and quotas, and the
EU's ban on hormone-treated beef, took considerably more time (between 24 to
27 months). For cases brought against the United States, the timing was
closer to the timetables, with rulings in 19 months on average.

ï¿½ The time provided for WTO members to implement final WTO dispute
settlement rulings in most cases has fallen well within WTO guidelines of 15
months. It ranged from as little as 3 months in the Australia leather case
(case 24), to 8 months for a case involving Argentina's restrictions on
imports of textiles, apparel, and footwear (case 23) and for the Korea
semiconductors case (case 36), to 65 months for a case (case 4) involving
Japan liquor taxes (the United States secured concessions for agreeing to
this extended implementation period). For the cases we examined, an
implementation period of between 9 to 15 months was typical. Only 2 of the
15 cases involved implementation periods in excess of 15 months (Japan
liquor taxes and India balance-of-payments). In rulings against the United
States, the implementation period was 6 months on average, with none longer
than 15 months.

USTR officials said that several factors affect the dispute settlement
system's timeliness. For example, cases are slowed down by the
unavailability of panelists and the need for translation of documents. In
addition, on occasion the complainants themselves seek additional time to
prepare their cases.

WTO dispute settlement decisions can have far-reaching effects, but
information about and input into WTO proceedings is limited. The WTO dispute
settlement system was established as a forum to resolve disputes between WTO
member governments. Governmental parties to the dispute have certain rights,
including the right to be heard, to receive and submit documents at
prescribed intervals, to comment on draft panel reports, and to appeal panel
decisions. However, unless they are recognized third parties in the case,
other WTO members have no rights to participate in proceedings or to submit
or receive documents, nor do other international organizations,
nongovernmental organizations, local governments, and private persons.
Members generally do not make their submissions to panels and the Appellate
Body public, outside parties cannot observe or participate in proceedings,
and transcripts are not prepared or made publicly available. Numerous U.S.
officials, legal experts, business representatives, and interest groups say
the secrecy that attends WTO dispute settlement proceedings undermines its
legitimacy.

Some progress has been made in opening the system. As a result of a 1996 WTO
decision, panel and Appellate Body reports are now released to the public
immediately upon release to all WTO members. In several recent cases, key
submissions of arguments by each party have been released to the public by
mutual agreement among the parties to the dispute. Outside counsel are now
permitted to attend WTO proceedings if they are made part of a disputing
parties' delegation by that government. Moreover, in the shrimp-turtle case,
the WTO Appellate Body decided that dispute settlement panels had the
authority to consider the submission of amicus curiae or "friend of the
court" legal briefs even if the briefs were not requested by the panel. In
the recent WTO decision involving lead bar from the United Kingdom, the
Appellate Body stated that individuals and organizations have no legal right
to make submissions or to be heard by the Appellate Body but found that the
Appellate Body has the legal authority to accept and consider amicus curiae
briefs.

The United States has proposed additional steps at the WTO to improve
transparency and has done some things on its own to give affected U.S.
interests indirect access to the dispute settlement process. The Uruguay
Round Agreements Act set forth procedural requirements to foster
transparency and consultation with domestic stakeholders during WTO dispute
settlement proceedings, including statutory trade advisory committees.33
Recently, USTR instituted the practice of publishing a Federal Register
notice whenever it initiates or is subject to WTO consultations, providing
an opportunity for public input at an earlier stage. The commercial and
public interest groups we consulted felt that full and timely consultation
with domestic stakeholders was critical to effective U.S. participation in
WTO dispute settlement. The U.S. government was praised for taking steps to
improve public participation and domestic consultations, but some said
formal and informal mechanisms still need improvement. For example, several
nongovernmental organizations said the statutory trade advisory mechanism as
currently structured does not fully represent all the U.S. interests that
could be affected by WTO decisions and that wider consultation prior to
initiating cases was desirable. Within the WTO, the United States has
proposed opening up panel proceedings to observation by outside parties,
making legal briefs and other panel submissions public, permitting
submission of amicus curiae briefs, and obtaining earlier public release of
panel reports. USTR is also seeking more timely compliance with a WTO
requirement for parties to provide nonconfidential summaries of submissions
upon request.

However, the United States faces outright opposition or limited support from
most other WTO members to opening the WTO dispute settlement process
further. At the root of this resistance is disagreement among WTO members
over whether the dispute settlement process is an adjudicative one, where
court-like transparency protections may be appropriate, or an
intergovernmental conciliation mechanism, where confidential discussions are
more typical. WTO members also disagree on the merits of greater openness in
fostering full and impartial consideration of relevant issues. Many members
say the WTO should retain its character as a strictly
government-to-government forum and warn that there is a danger of
overloading the system and subjecting it to interest group pressures more
appropriately channeled through members' own domestic political mechanisms.
There is also some concern that allowing outside participants may give
developed countries an advantage over less developed countries, given their
greater resources.

We obtained oral comments on a draft of this report from the Assistant USTR
for Monitoring and Enforcement, who also included comments from USTR's
Offices of General Counsel, WTO and Multilateral Affairs, and the Chief
Economist. USTR officials generally agreed with the information in the
report and provided technical comments that we incorporated as appropriate.

We are sending copies of this report to appropriate congressional
committees. We are also sending copies of this report to the Honorable
Charlene Barshefsky, U.S. Trade Representative. Copies will be made
available to others upon request.

If you or your staff have any questions about this report, please contact me
on (202) 512-4128. Another GAO contact and staff acknowledgments are listed
in appendix IV.

Sincerely yours,

Susan S. Westin, Associate Director
International Relations and Trade Issues

Summaries of 42 World Trade Organization Dispute Settlement Cases

The United States has been involved in 42 dispute settlement cases that have
reached a conclusion from the World Trade Organization's (WTO) inception in
1995 through March 16, 2000, according to the U.S. Trade Representative
(USTR). All the cases began with a request by a WTO member for consultations
about an alleged violation of WTO obligations as set forth in the WTO
agreements or accession documents. The cases then followed different paths
through the dispute settlement system. Some were resolved before formal
consultations took place. About half of the cases went to a WTO panel for
adjudication. Table 1 lists the cases in chronological order. It is followed
by a brief summary of each case that includes information on the case's
outcome, major issues, resolution, and actions taken to comply with panel
rulings.

  GAO case                                WTO dispute   Date of request for
  number             Case name              numbera        consultation

 1          U.S. regulations affecting    DS-2         01/24/95
            gasoline imports

 2          Korea's agricultural          DS-5         05/03/95
            shelf-life standards

 3          U.S. import duties on         DS-6         05/17/95
            automobiles from Japan

 4          Japan's taxes on distilled    DS-11        07/07/95
            spirits
 5          European Union grain tariffs  DS-13        07/19/95

 6          European Union banana import  DS-16        09/28/95
            regime

 7          U.S. underwear import         DS-24        12/22/95
            restraint

 8          European Union ban on meat    DS-26        01/26/96
            from hormone-treated animals
 9          Japan sound recordings        DS-28        02/09/96

 10         Canada's measures on          DS-31        03/11/96
            magazines

 11         U.S. wool coat import         DS-32        03/14/96
            restraint

 12         U.S. wool shirt import        DS-33        03/14/96
            restraint

 13         Hungary's agricultural export DS-35        03/27/96
            subsidies

 14         Pakistan patent mailbox       DS-36        04/30/96
            provision
 15         Portugal patent protection    DS-37        04/30/96
 16         U.S. Helms-Burton Act         DS-38        05/03/96

 17         U.S. tariff retaliation on    DS-39        04/17/96
            European Union products

 18         Turkey's taxation of foreign  DS-43        06/12/96
            films

 19         Japan's import measures       DS-44        06/13/96
            affecting film
            U.S. antidumpingb
 20         investigation on Mexican      DS-49        07/01/96
            tomatoes

 21         India patent mailbox          DS-50        07/02/96
            provision
 22         Brazil's automobile regime    DS-52        08/09/96

 23         Argentina duties on textiles, DS-56        10/04/96
            apparel, and footwear

 24         Australia automotive leather  DS-57        10/07/96
            export subsidies

 25         U.S. ban on shrimp imports to DS-58        10/08/96
            protect turtles

 26         Indonesia automobile and auto DS-59        10/08/96
            parts measures
            European Union customs
 27         classification of computer    DS-62        11/08/96
            equipment

 28         U.S. antidumping order on     DS-63        11/28/96
            urea

 29         Philippines pork and poultry  DS-74        04/01/97
            tariff-rate quotasc

 30         Japan's measures affecting    DS-76        04/07/97
            fruit imports

 31         U.S. textiles and apparel     DS-85        05/22/97
            rules of origin

 32         Korea's taxes on distilled    DS-84        05/23/97
            spirits

 33         Sweden's civil procedures for DS-86        05/28/97
            intellectual property

 34         U.S. antidumping order on     DS-89        07/10/97
            color television receivers

 35         India's quantitative import   DS-90        07/15/97
            restrictions

 36         U.S. antidumping order on     DS-99        08/14/97
            Korean semiconductors

 37         U.S. ban on imports of        DS-100       08/18/97
            European poultry
            Mexico's antidumping
 38         determination on high         DS-101       09/04/97
            fructose corn syrup

 39         Canada dairy subsidies and    DS-103       10/08/97
            quotas

 40         U.S. tax treatment for        DS-108       11/18/97
            foreign sales corporations

 41         U.S. imports of Canadian      DS-144       09/25/98
            cattle, swine, and grain

 42         Provisions of the U.S. Trade  DS-152       11/25/98
            Act of 1974

aThe WTO's internet site, www.wto.org , maintains official records on all
dispute settlement cases. The site can be used to search for information on
these cases using the WTO's case identification number, which is included in
this column.

bAntidumping duties are imposed on imports to neutralize the injurious
effect of unfair pricing practices known as "dumping."

cA tariff-rate quota is the application of a lower tariff rate for a
specified quantity of imported goods. Imports above this specified quantity
face a higher tariff rate.

Source: GAO analysis.

Parties

Plaintiffs: Venezuela, Brazil
Defendant: United States

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against the United States.
The United States then modified its regulations to come into compliance with
the ruling.

Major Case Issues

ï¿½ U.S. regulations implementing 1990 Clean Air Act amendments were
challenged in the WTO as disadvantageous to foreign suppliers in
contravention of WTO rules. Venezuela and Brazil said that several aspects
of a U.S. rule involving the cleanliness of gasoline were discriminatory,
particularly the fact that foreign suppliers were assigned a statutory
baseline whereas domestic suppliers had individual baselines based on their
refineries' own performance in 1990. Venezuela and Brazil said the rule was
not necessary because the United States had less trade-restrictive means to
achieve its objectives.

ï¿½ The U.S. government recognized that foreign and domestic products were not
treated identically but argued that the treatment qualified for WTO
exceptions because it was necessary to protect human, animal, and plant
health and related to conservation of a natural resource, clean air. The
United States argued that alternatives to the measure were impractical
because of unavailability of data, enforcement problems, and the possibility
of adverse environmental consequences.

Case Resolution

ï¿½ The panel found that the less favorable aspects of the gasoline rule were
not necessary and not directly related to improving U.S. air quality, and
thus could not be justified.

ï¿½ The United States appealed the panel ruling, stating that the panel's
legal interpretation of the WTO exception for conservation was
inappropriately narrow. The Appellate Body agreed with the United States on
this important point of principle; however, it found the U.S. measure was
applied in an unjustifiably discriminatory manner and constituted a
disguised restriction on trade. Specifically, it found that the U.S.
government had not sought to overcome administrative problems with allowing
foreign refiners to establish individual baselines and had only considered
the adjustment costs for domestic, rather than foreign, refiners.

Actions Taken to Comply

ï¿½ The Environmental Protection Agency revised its regulations on
conventional gasoline, which now permit but do not require foreign refiners
to apply for an individual baseline.

ï¿½ The agency imposed enforcement requirements and established a mechanism to
ensure that the overall cleanliness of gasoline imports does not
deteriorate.

Parties

Plaintiff: United States
Defendant: Korea

Outcome

ï¿½ Korea and the United States resolved the dispute prior to a WTO panel
proceeding. Korea agreed to modify its shelf-life regime.

Major Case Issues

ï¿½ In May 1995, the United States filed a WTO complaint, stating that Korea's
shelf-life requirements, including the 30-day shelf-life requirement for
frozen, heat-treated meats was based on unscientific principles and
inconsistent with WTO rules. The United States further claimed that the
shelf-life of food products should be determined by the manufacturers, as it
is in most countries.

ï¿½ In February 1994, Korea had reclassified imports of U.S. frozen,
heat-treated products, reducing the allowable shelf-life of these products
from 90 to 30 days. In effect, Korean shelf-life requirements set such short
time frames that many longer-lived food imports could not be marketed in
Korea. For example, the requirements essentially eliminated imports of U.S.
sausages, since the 30-day shelf-life was about equal to the time it took
for these products to clear port inspections.

ï¿½ Korea claimed its action was necessary to protect public health.

Case Resolution

ï¿½ In July 1995, the United States and Korea informed the WTO that they had
reached a mutually acceptable agreement resolving the dispute. Korea agreed
to change its import regime to allow manufacturers of various products to
determine their shelf-life.

Actions Taken to Comply

ï¿½ No action required.

Parties

Plaintiff: Japan
Defendant: United States

Outcome

ï¿½ The United States and Japan resolved this dispute by negotiating a trade
agreement. As a result of the agreement, the United States withdrew its
threat of punitive import duties, and Japan did not pursue its WTO case.

Major Case Issues

ï¿½ Japan requested consultations after the United States threatened to impose
unilateral punitive import duties on $5.9 billion in annual U.S. imports of
automobiles from Japan. The U.S. action followed an affirmative
determination under section 301 of the U.S. Trade Act of 1974.34 Japan
maintained that the U.S. measures violated WTO obligations regarding
nondiscrimination among trading partners and nonimposition of customs duties
exceeding those in the U.S. Schedule of Concessions. Japan also argued that
the measures were inconsistent with the Dispute Settlement Understanding,
which prohibits unilateral action to resolve disputes over trade under
covered agreements.

ï¿½ The United States countered that its action was warranted because it was
apparent after 20 months of talks that Japan would not take steps to allow
real market access in a sector accounting for nearly 25 percent of the U.S.
global trade deficit. Among other things, the United States asserted that
Japanese restrictions channeled most repair work to Japanese
government-certified garages that used few foreign parts, limited the
development of other garages more likely to carry foreign parts, and
constrained opportunities for U.S. automotive accessory suppliers.

Case Resolution

ï¿½ Prior to the formation of a dispute settlement panel, the United States
and Japan reached a bilateral agreement on measures to deregulate the
replacement parts and accessories market in Japan. The agreement's
objectives were the significant expansion of sales opportunities and
purchases of foreign parts by Japanese firms and their U.S.-based production
facilities, the removal of problems that affect market access, and the
encouragement of imports of foreign autos and auto parts in Japan.

ï¿½ On the basis of the agreement, the United States terminated the section
301 investigation and began monitoring compliance with the agreement.

ï¿½ Japan did not pursue establishment of a dispute settlement panel.

Actions Taken to Comply

ï¿½ No action required.

Parties

Plaintiff: United States
Defendant: Japan

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against Japan, which
subsequently equalized its taxes.

Major Case Issues

ï¿½ The United States complained that Japan imposed different levels of
internal taxes on shochu (a type of alcohol) and other distilled spirits and
liquors under its Liquor Tax Law. The United States considered the lower tax
rate accorded to shochu to violate the WTO principle of national treatment
(that foreign goods should not be taxed less favorably than domestic goods)
for vodka, rum, gin, whisky, and brandy.

ï¿½ Japan claimed that these alcohol products did not directly compete with
shochu and thus its Liquor Tax Law did not violate the principle of national
treatment.

Case Resolution

ï¿½ The WTO panel and the Appellate Body ruled that Japan's Liquor Tax Law
violated the WTO national treatment principle because shochu and vodka are
like products, and other alcohols were directly competitive or substitutable
products. Therefore, both bodies recommended that Japan should bring its
Liquor Tax Law into conformity with its national treatment obligations under
the 1994 General Agreement on Tariffs and Trade.

Actions Taken to Comply

ï¿½ After the Appellate Body ruling, the United States requested arbitration
on Japan's compliance period. The United States sought 5 months (from the
adoption of the ruling); Japan countered with 23 months. The arbitrator
decided to give Japan 15 months to comply.

ï¿½ Japan and the United States reached an agreement after the arbitration
that allowed Japan more time to implement the decision in exchange for lower
tariffs on various liquor products. Japan has begun lowering its tariffs and
phasing in the changes to its tax law. It will complete these actions in
2002.

Parties

Plaintiff: United States
Defendant: European Union

Outcome

ï¿½ The United States successfully used the WTO dispute settlement
consultation process as a vehicle to get the European Union (EU) to improve
market access for U.S. grain exports.

Major Case Issues

ï¿½ In July 1995, the United States requested consultations in a matter
involving implementation of a U.S.-EU agreement providing for a maximum duty
(ceiling) to be paid on most imported grain. The United States expected the
EU to apply a consignment-by-consignment method to determine the duty owed,
but the EU believed that such an approach was impractical. The bilateral
agreement had been reached during the Uruguay Round negotiations and
incorporated into the EU's WTO tariff schedule, but the parties disagreed
about how the duties would be assessed, delaying implementation.

Case Resolution

ï¿½ The United States and the EU reached an understanding in December 1995
that provided for a maximum duty to be paid on most imported grain based on
a representative price system instead of the consignment-by-consignment
method. This approach entailed assessment of duties based on the margin
between a reference price (derived from the average international market
price for that particular grain variety over a 2-week period) and the duty
ceiling for that grain variety.

ï¿½ The EU also agreed to provide a special duty rebate for parboiled brown
rice, and a tariff-rate quota (TRQ) for malting barley.

Actions Taken to Comply

ï¿½ After the December 1995 settlement, the United States renewed its request
for a panel based on the EU's failure to implement the settlement terms.
After additional negotiations, the EU implemented the settlement in 1997 by
passing legislation creating the tariff-rate quota for malting barley, the
duty rebate for parboiled brown rice, and subsequently the 8 percent
reduction on the tariff for parboiled brown rice.

Parties

Plaintiffs: United States and others35
Defendant: European Union

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against the EU. Further, a
compliance panel also ruled that the EU had failed to comply with the
rulings. The WTO authorized retaliation.

Major Case Issues

ï¿½ The United States and four Latin American countries complained that the
1993 EU regime for importing bananas was inconsistent with WTO rules. The
regime provided a duty-free quota to bananas from former colonies of some EU
members, while imports from Latin America were subject to a restrictive TRQ.
The system also shifted marketing of bananas from U.S. and other non-EU
firms to favor EU firms.

ï¿½ The EU argued that the 1993 regime was required to integrate a complex
system of national regulations and establish a common market for bananas,
while meeting EU commitments to former colonies.

Case Resolution

ï¿½ Both the WTO panel and the Appellate Body ruled that the EU's banana
regime violated WTO rules that resulted in (1) distribution of import
licenses to EU firms, taking away U.S. companies' business;
(2) imposition of burdensome licensing requirements for banana imports from
Latin America; and (3) discriminatory allocation of access to the EU market,
restricting Latin American bananas while not similarly limiting bananas from
former colonies.

ï¿½ In response, the EU enacted a revised banana regime in 1999. The original
five countries plus Panama then argued that the revised EU banana regime was
virtually the same as the 1993 WTO-inconsistent regime.

ï¿½ The WTO arbitrators agreed with the complainants and rejected the EU's
position that the revised regime fulfilled its obligation in conformity with
the WTO panel ruling.

Actions Taken to Comply

ï¿½ The WTO authorized the United States to suspend concessions covering trade
in an amount of $191.4 million, equal to the harm done to U.S. economic
interests.

Parties

Plaintiff: Costa Rica
Defendant: United States

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against the United States,
and the United States allowed the import restraint to expire.

Major Case Issues

ï¿½ After failed consultations with Costa Rica under the WTO Agreement on
Textiles and Clothing (ATC), the United States imposed a quantitative
restraint on imports of cotton and manmade fiber underwear from Costa Rica,
claiming serious damage, or actual threat thereof, under the ATC.

ï¿½ Subsequently, although the ATC's Textile Monitoring Body36 did not find
serious damage, it failed to reach consensus on whether there was an actual
threat of serious damage. Costa Rica requested a dispute settlement panel,
claiming that the U.S. quantitative restriction was inconsistent with the
ATC and should be withdrawn. Costa Rica also claimed that the United States
had acted inconsistently with the ATC by backdating the quantitative
restraint.

Case Resolution

ï¿½ The panel ruled that the United States had violated the ATC by imposing a
restriction on Costa Rican imports without having demonstrated that they had
caused or threatened serious damage to U.S. industry. The panel also ruled
that the United States had violated the ATC by setting the restraint period
starting on the date of the request for consultations--March 22,
1995--rather than on the date of the publication in the Federal Register of
that information--April 21, 1995.

ï¿½ Costa Rica appealed the portion of the panel finding that allowed the
United States to backdate its restraint to the date of publication. The
United States argued that authority to backdate a restraint was essential to
allow an importing member to protect itself from speculative import surges.

ï¿½ The Appellate Body overruled the WTO panel and found that giving
retroactive effect to a safeguard restraint is not permitted by the ATC. The
Appellate Body did point out, however, that when a flood of imports becomes
a real and serious problem, members can act under a provision of the ATC
that authorizes immediate application of a restraint in highly unusual and
critical circumstances.

Actions Taken to Comply

ï¿½ The United States allowed the import restraint to expire.

Hormone-Treated Animals

Parties

Plaintiff: United States
Defendant: European Union

Outcome

ï¿½ Both the WTO panel and the Appellate Body found the EU in violation of WTO
obligations. The United States was authorized to suspend concessions to the
EU when the EU was found not to have complied with the rulings.

Major Case Issues

ï¿½ The United States claimed that a ban on the importation and sale of
animals and meat derived from animals that had been treated with any of six
specific growth hormones, was inconsistent with several aspects of the WTO
Agreement on the Application of Sanitary and Phytosanitary (human, animal,
and plant health) Measures. The United States argued in part that the
measures were not based on an assessment of risk, were more trade
restrictive than required to protect human life or health, were not based on
scientific principles, and were maintained without sufficient scientific
evidence.

ï¿½ The EU argued that its measures satisfied all conditions imposed by the
WTO Agreement on the Application of Sanitary and Phytosanitary Measures.

Case Resolution

ï¿½ The panel and Appellate Body both found that the EU measures were
inconsistent with the agreement.

ï¿½ However, the Appellate Body overruled the panel on certain substantive and
procedural issues. For example, the Appellate Body overturned the panel by
concluding that a member need not demonstrate that it actually took into
account a risk assessment when it enacted or maintained the measure. The
Appellate Body also modified the Panel's interpretation by finding that a
member must be able to both cite a risk assessment relating to the
sanitary/phytosanitary measure it had adopted and to demonstrate that the
results of the risk assessment sufficiently warrant or reasonably support
the sanitary/phytosanitary measure at stake. It went on to state that the
agreement does not require the risk assessment to embody only the view of a
majority of the scientific community.

ï¿½ Neither the WTO panel nor the Appellate Body made a direct finding on the
U.S. argument regarding whether the EU measures were based on scientific
principles and maintained without sufficient scientific evidence. Rather,
they found the measure was not based on a risk assessment.

Actions Taken to Comply

ï¿½ The United States and the EU disagreed about what steps the EU could take
to comply with the ruling. Ultimately, the WTO authorized suspension of U.S.
trade concessions to the EU in the amount of
$116.8 million per year.

Parties

Plaintiff: United States
Defendant: Japan

Outcome

ï¿½ Japan and the United States reached a mutually satisfactory agreement
prior to a panel decision whereby Japan amended its copyright protection to
grant 50 years' protection for sound recordings.

Major Case Issues

ï¿½ The United States argued that Japan's copyright law did not adequately
protect sound recordings as required by the Agreement on
Trade-Related Aspects of Intellectual Property Rights. The United States
argued that the agreement requires countries to protect sound recordings for
50 years from the date of the copyright or when the performance took place
and that this protection should be applied retroactively to pre-existing
recordings. At the time the case was brought, this would have protected
recordings going back to 1946. Japan's copyright law only protected
recordings produced after
January 1, 1971, when Japan first implemented a law enforcing copyright
protection.

ï¿½ Japan argued that the agreement allows WTO members to determine their own
level of retroactive protection and that since Japan did not provide
retroactive protection beyond 1971 for its own copyright holders, it did not
have to do so for foreign copyright holders.

Case Resolution

ï¿½ The United States and Japan reached a negotiated agreement and terminated
consultations. In the agreement, Japan indicated that it had amended
Japanese copyright law to extend protection for sound recordings for at
least 50 years.

ï¿½ Japan also agreed to extend that protection to existing recordings that
had not already enjoyed a 50-year term of protection in the country of
origin or in the country in which protection was sought.

Actions Taken to Comply

ï¿½ Japan passed legislation changing domestic copyright laws to protect
existing sound recordings going back 50 years instead of only providing
protection to existing recordings produced after January 1, 1971.

Parties

Plaintiff: United States
Defendant: Canada

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against Canada.

Major Case Issues

ï¿½ The United States complained that Canada maintained several measures that
prohibited import of certain periodicals to Canada, imposed an
80-percent excise tax on certain "split-run"37 periodicals, and applied
favorable postal rates to certain Canadian periodicals. The United States
argued that these measures were in conflict with WTO prohibitions against
quantitative restrictions on imports and with Canada's national treatment
obligations.

ï¿½ Canada argued that its import prohibition on magazines was a justifiable
exception to the GATT's prohibition on quantitative restrictions, that its
excise tax affecting trade in services was not subject to GATT
nondiscrimination requirements, and that its postal subsidy rates were
either not covered by GATT or were allowable.

Case Resolution

ï¿½ The WTO panel found that Canada's import ban was not justified as an
exception under other WTO provisions and violated WTO provisions on
quantitative restrictions. It also found that Canada's excise tax violated
national treatment because it resulted in different rates of internal tax
that disadvantaged imports. However, it found Canada's postal subsidy to be
exempt from national treatment requirements under a provision in GATT 1994.

ï¿½ The Appellate Body upheld the panel's findings on the excise tax but
reversed the panel's ruling on the postal subsidy, finding it to violate
national treatment rules.

Actions Taken to Comply

ï¿½ Canada complied with the WTO panel ruling by repealing its import ban on
split-runs, discontinuing the excise tax, eliminating discriminatory postal
rates, and modifying postal subsidies. However, Canada introduced
legislation shortly before taking these measures that would have prohibited
U.S. and other non-Canadian publishing companies from advertising directly
to Canadian readers in magazines they produce. Under a U.S. threat of
sanctions under the North American Free Trade Agreement (NAFTA), the two
countries entered into a bilateral agreement requiring concessions by Canada
in exchange for a U.S. agreement not to challenge the Canadian measures
under WTO, NAFTA, or section 301 of the 1974 Trade Act. The proposed
legislation was modified before being enacted.

Parties

Plaintiff: India
Defendant: United States

Outcome

ï¿½ The case was resolved when the United States agreed to remove the import
restraint and India agreed to withdraw its request for a WTO panel.

Major Case Issues

ï¿½ Pursuant to the WTO Agreement on Textiles and Clothing, the United States
requested consultations with India on its exports of women's and girls' wool
coats, claiming serious damage to U.S. industry or actual threat thereof.
India disagreed, and on July 14, 1995, the United States imposed an import
restraint on these imports from India, effective retrospectively from April
18, 1995.

ï¿½ The Textile Monitoring Body reviewed the case and found that serious
damage had not been demonstrated but could not reach consensus on the actual
threat of serious damage. In a second report, the body could not decide
whether the restraint could continue because of the absence of consensus on
the existence of an actual threat of serious damage.

ï¿½ India requested a WTO panel, complaining that the restraint was
inconsistent with the WTO Agreement on Textiles and Clothing.

Case Resolution

ï¿½ The United States agreed to remove its import restraint and India then
terminated further dispute settlement action.

Actions Taken to Comply

ï¿½ No action required.

Parties

Plaintiff: India
Defendant: United States

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled that the U.S. import
restraint was improper but agreed that India had the burden of proof in the
case. The United States had already withdrawn the restraint prior to the
rulings.

Major Case Issues

ï¿½ India complained that an import restraint the United States had placed on
imports of woven wool shirts and blouses from India was inconsistent with
the ATC. India argued that the burden of demonstrating serious damage or the
actual threat thereof was on the United States, the importing member that
had imposed the restraint.

ï¿½ During consultations and the panel process, the United States asserted
that imports of Indian woven wool shirts and blouses were causing serious
damage or the actual threat thereof to U.S. industry. The Textile Monitoring
Body had reviewed the case and found that the actual threat of serious
damage had been demonstrated, and that this threat could be attributed to
imports from India.

Case Resolution

ï¿½ The panel concluded that the U.S. import restraint violated provisions of
the ATC because the United States had not shown serious damage or the actual
threat thereof to U.S. industry from the import of India woven wool shirts
and blouses. The panel also found that the burden was on India, the party
initiating the panel proceedings, to establish that the U.S. restraint was
inconsistent with the ATC.

ï¿½ India appealed the burden of proof issue, and the Appellate Body affirmed
the panel finding, concluding that India had the burden to establish a
presumption that the U.S. restraint determination was inconsistent with the
ATC. The United States then had the burden of rebutting this presumption.

Actions Taken to Comply

ï¿½ The United States withdrew the import restraint prior to the panel and
Appellate Body ruling due to a steady decline in imports of the Indian
products in question.

Parties

Plaintiffs: United States and others38
Defendant: Hungary

Outcome

ï¿½ Hungary agreed to change its agricultural export subsidy practices. The
WTO granted Hungary a temporary waiver so that it could come into
compliance.

Major Case Issues

ï¿½ The complaining parties argued that the level of export subsidies provided
by the government of Hungary for certain agricultural commodities exceeded
its commitment under GATT 1994.

ï¿½ Hungary maintained that a mistake was made in compiling the data used to
calculate its commitment to reduce subsidies. Hungarian authorities argued
that if subsidy reductions were undertaken at the levels required, the
country's agricultural sector would be seriously damaged.

Case Resolution

ï¿½ In July 1997, an agreement was reached between Hungary and the complaining
countries. Hungary agreed to comply with its original export subsidy
schedule in exchange for a temporary waiver that gives it a longer
transition period to reduce its export subsidies for certain agricultural
commodities.

ï¿½ The agreement requires Hungary to cut its export subsidy levels by more
than 65 percent. Hungary will replace these subsidies with domestic support
measures, consistent with its WTO obligations.

Actions Taken to Comply

ï¿½ In December 1997, the Hungarian government published a new export subsidy
regime. Hungary has also undertaken a shift from exporter subsidies to
domestic support.

Parties

Plaintiff: United States
Defendant: Pakistan

Outcome

ï¿½ The United States and Pakistan reached an agreement prior to a panel
decision whereby Pakistan agreed to come into compliance with WTO
intellectual property provisions.

Major Case Issues

ï¿½ The United States complained that Pakistan had neither made patent
protection available for pharmaceutical and agricultural chemical inventions
nor established a system, called a "mailbox,"39 for filing patent
applications for these inventions, as required by the Agreement on
Trade-Related Aspects of Intellectual Property (TRIPS). The United States
also argued that Pakistan had failed to establish a system to provide patent
applicants with exclusive marketing rights for their products as required by
the agreement.

ï¿½ Pakistan responded that its parliament was considering amending its patent
law to include mailbox provisions.

Case Resolution

ï¿½ The United States and Pakistan negotiated a mutually agreed solution to
the dispute, in which Pakistan stated that it had taken action to come into
compliance with TRIPS.

Actions Taken to Comply

ï¿½ Pakistan's President issued an ordinance to provide a system for
submitting patent applications and for granting exclusive marketing rights
to the patent applicant, in accordance with TRIPS.

Parties

Plaintiff: United States
Defendant: Portugal

Outcome

ï¿½ Portugal amended its patent law to comply with WTO obligations.

Major Case Issues

ï¿½ The United States complained that the term limit that Portugal granted
existing patents under Portuguese law was inconsistent with Portugal's
obligations under the WTO TRIPS agreement. TRIPS requires members to grant
patent protection for at least 20 years from the date the application is
filed. TRIPS also requires developed country members to grant this term to
all patents in force as of January 1, 1996, from the date of the
application. Portugal had previously amended its patent law to comply with
this TRIPS requirement, but the law only applied to future patents.

Case Resolution

ï¿½ The United States and Portugal negotiated a mutually agreed solution to
their dispute. The agreement stated that Portugal had changed its patent law
to confirm that all patents that were already in force on January 1, 1996,
and all patents granted after that date that were pending on January 1,
1996, would receive protection for either 15 years from the date of the
patent or 20 years from the effective filing date, whichever is longer.

Actions Taken to Comply

ï¿½ Portugal passed legislation changing its patent law.

Helms-Burton Act

Parties

Plaintiff: European Union
Defendant: United States

Outcome

ï¿½ Resolved through a political understanding between United States and the
EU.

Major Case Issues

ï¿½ After passage of the Cuban Liberty and Democratic Solidarity (Libertad)
Act of 1996 (Helms-Burton Act),40 the EU requested a panel and complained
about several aspects of U.S. trade sanctions against Cuba. With regard to
Helms-Burton, the EU complained about titles III and IV, which respectively
(1) created a private right of action for U.S. persons or entities against
others who have trafficked in property confiscated by the Cuban government
and (2) required the Secretary of State to deny U.S. visas and exclude from
the United States individuals or officials of firms that had confiscated or
trafficked in property owned by a U.S. national.

ï¿½ The United States argued that the EU assertions involved a foreign policy
rather than a trade issue and that the WTO was not the appropriate forum for
resolution.

Case Resolution

ï¿½ Prior to a panel decision, in 1997 the United States and the EU announced
a bilateral, political understanding. The EU agreed to
(1) suspend the WTO proceedings, (2) continue its efforts to promote
democracy in Cuba, and (3) step up efforts to develop disciplines and
principles for strengthening investment protection both bilaterally with the
United States and multilaterally. In exchange, the United States pledged to
seek authority from Congress to allow the President to waive title IV of
Helms-Burton. As part of this understanding, the United States also agreed
to work with the EU toward meeting the terms for waivers

under the 1996 Iran and Libya Sanctions Act,41 though with no commitment to
grant such waivers. The understanding also provided that the EU reserved the
right to resume panel proceedings if action is taken against EU companies or
individuals under titles III or IV of Helms-Burton or if waivers under the
Iran and Libya Sanctions Act were not granted.

ï¿½ In a subsequent 1998 understanding, the United States and the EU agreed
that certain described disciplines and principles for strengthening
investment protection would apply when the U.S. administration obtains an
amendment to waive title IV of Helms-Burton.

Actions Taken to Comply

ï¿½ Legislation authorizing the waiver has not yet been enacted.

Parties

Plaintiff: European Union
Defendant: United States

Outcome

ï¿½ The EU withdrew its panel request after the United States dropped the
retaliatory duties in question.

Major Case Issues

ï¿½ The EU requested a WTO panel to examine U.S. tariff increases on imports
from the EU. The duties had been imposed by the United States in 1989 as
part of a section 301 determination in retaliation for EU legislation that
resulted in a ban on imports of hormone-treated beef after the EU blocked
U.S. efforts to submit the matter to dispute settlement under the Tokyo
Round Agreement on Technical Barriers to Trade.

ï¿½ The EU stated that maintenance of the retaliatory duties was inconsistent
with U.S. obligations under GATT and the WTO dispute settlement
understanding.

Case Resolution

ï¿½ The United States requested its own WTO dispute settlement panel to
examine the consistency of the EU's hormone ban with WTO obligations. The
United States withdrew the retaliatory duties after this panel was
established.

ï¿½ The EU then withdrew its complaint.

Actions Taken to Comply

ï¿½ No action required.

Parties

Plaintiff: United States
Defendant: Turkey

Outcome

ï¿½ The case was settled before reaching a WTO panel.

Major Case Issues

ï¿½ The United States complained that Turkey imposed a 25-percent municipality
tax on box office receipts generated from the showing of foreign-origin
films but did not apply the tax to domestic films. The United States
considered this tax a violation of the WTO principle of national treatment
(that foreign goods should not be taxed less favorably than domestic goods).

Case Resolution

ï¿½ The case was settled before WTO panel deliberations began. Turkey agreed
to equalize taxes imposed on box office receipts from the showing of
domestic and imported films. As a result, the United States and Turkey
agreed to formally terminate consultations, and the United States withdrew
the matter from WTO consideration.

Actions Taken to Comply

ï¿½ Turkey equalized the applicable taxes in December 1997.

Parties

Plaintiff: United States
Defendant: Japan

Outcome

ï¿½ The WTO panel ruled against the United States, which did not appeal the
decision.

Major Case Issues

ï¿½ The United States complained that the government of Japan had implemented
measures affecting the distribution and sale of consumer photographic film
and paper that denied the United States the benefits of tariff concessions
Japan had made, afforded protection to domestic production, and accorded
less favorable treatment to imported film and paper than to comparable
products of national origin. In addition, the United States claimed the
measures lacked transparency (openness) and were not administered in a
uniform, impartial manner.

ï¿½ The United States further asserted that the measures (1) closed
traditional distribution channels to foreign manufacturers, (2) restricted
alternative channels of distribution, and (3) restricted the ability of
foreign firms to use sales promotions to break into the market or expand
their market presence.

ï¿½ Japan denied all the U.S. claims, stating that its market for film was
open and that there were no government distribution or promotion measures
that afforded protection to domestic industry or disadvantaged foreign
suppliers.

Case Resolution

ï¿½ The panel concluded that the United States had not provided sufficient
evidence to support its claims against the government of Japan.
Specifically, the panel found that the United States did not prove that
(1) the Japanese measures individually or collectively nullified or impaired
tariff benefits accruing to the United States, (2) the Japanese measures
accorded less favorable treatment to imported photographic film and paper
than to domestic film and paper, and (3) Japan failed to publish
administrative rulings of general application and thereby violated WTO
requirements for transparency and impartial administration.42

Actions Taken to Comply

ï¿½ No action required.

Parties

Plaintiff: Mexico
Defendant: United States

Outcome

ï¿½ The case was resolved outside of WTO dispute settlement due to an
agreement between Mexican tomato growers and the Department of Commerce. A
WTO dispute settlement panel was not established.

Major Case Issues

ï¿½ Mexico requested consultations regarding the U.S. initiation of an
antidumping investigation on fresh and refrigerated Mexican tomatoes.
Commerce issued a preliminary determination that would have imposed
antidumping duties of 17.56 percent on most Mexican tomatoes.

Case Resolution

ï¿½ After the preliminary antidumping determination was announced, Commerce
and the Mexican tomato growers signed a suspension agreement. The agreement,
which eliminates injury through the establishment of a predetermined floor
price for imported Mexican tomatoes, means the preliminary antidumping order
will not take effect and no future antidumping duties will be assessed as
long as the floor price is met. Following the agreement, Mexico did not
pursue its WTO matter further.

Actions Taken to Comply

ï¿½ No action required.

Parties

Plaintiff: United States
Defendant: India

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against India. India
amended its Patent Act to come into compliance with the WTO rulings.

Major Case Issues

ï¿½ The United States complained that India neither provided patent protection
for pharmaceutical and agricultural chemical products nor established a
formal system, called a "mailbox," for filing patent applications for these
products, as required by TRIPS. The United States also argued that India had
failed to establish a system to provide patent applicants with exclusive
marketing rights for their products.

ï¿½ India argued that the TRIPS Agreement allowed members to determine the
appropriate method of implementing the agreement and that since India had
effectively implemented the mailbox requirement through "administrative
action," legislation was not needed. India also argued that the transitional
arrangements in TRIPS allowed it to postpone legislation establishing a
system to provide patent applicants with exclusive marketing rights for
their products.

Case Resolution

ï¿½ The Appellate Body agreed with the panel ruling that India had not
complied with its obligations under TRIPS to establish a means for the
filing of mailbox applications for patents. The Appellate Body rejected
India's claim that it fulfilled its obligation through administrative action
and also agreed with the panel that India should have had a mechanism in
place to provide for the grant of exclusive marketing rights for those
inventions, effective from the date of entry into force of the WTO
Agreement.

Actions Taken to Comply

ï¿½ India approved amendments to its Patent Act to conform with TRIPS.

Parties

Plaintiff: United States
Defendant: Brazil

Outcome

ï¿½ Resolved through negotiation without proceeding to a WTO panel. Brazil
agreed to eliminate trade- and investment-distorting measures in its auto
regime.

Major Case Issues

ï¿½ The United States objected to various Brazilian measures that
(1) provided for tariff benefits to certain companies located in Japan,
South Korea, and the EU; (2) provided benefits to companies that invested in
automotive manufacturing in northeastern Brazil; and
(3) reduced duties for motor vehicles and parts manufacturers based on
compliance with an average domestic content requirement, and trade balancing
and local content requirements with regard to inputs. The United States
considered these measures to violate several WTO obligations.

Case Resolution

ï¿½ The case was settled by agreement between the United States and Brazil.
Brazil agreed to eliminate the trade- and investment-distorting measures in
its auto regime by December 31, 1999, and not to extend its program to its
Mercosur43 partners when their auto regimes are unified. In addition, Brazil
agreed that no applications would be accepted after certain dates for the
program, which may have limited the number of companies taking advantage of
the special benefits before they were phased out.

ï¿½ Several days after the agreement, the United States announced that it
would terminate its section 301 investigation on this matter.

Actions Taken to Comply

ï¿½ Brazil eliminated the trade- and investment-distorting measures under this
auto regime. The United States is monitoring the development of the auto
policies of Mercosur countries, including Brazil.

Parties

Plaintiff: United States
Defendant: Argentina

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against Argentina, which
then modified its methods for assessing duties and its statistical tax.44

Major Case Issues

ï¿½ The United States complained that Argentine measures imposing specific
duties (imposed per unit) on various textiles, apparel, and footwear in
excess of a bound rate of 35 percent ad valorem (percent ad valorem is the
percent value of the subject merchandise), were inconsistent with various
WTO obligations.

ï¿½ The United States also complained that Argentina's imposition of a
statistical tax of 3 percent ad valorem on these imports from all sources
other than Mercosur countries was WTO inconsistent.

ï¿½ Argentina contended that to the extent the specific duties did not exceed
the "ad valorem equivalent" of Argentina's bound rate of
35 percent, they were WTO consistent, as was the statistical tax.

Case Resolution

ï¿½ The panel ruled that the specific import duties Argentina imposed on
textiles and apparel were inconsistent with the requirements of GATT 1994.45
The panel also ruled that the statistical tax of 3 percent ad valorem
imposed by Argentina on imports was inconsistent to the extent that it
resulted in charges levied in excess of the costs of services rendered to
the specific exporters involved. GATT 1994 requires that these taxes be
limited to the approximate cost of services rendered.

ï¿½ The Appellate Body upheld the panel ruling but found that specific duties
could be imposed where there is a bound ad valorem rate so long as the
specific duties do not exceed that rate.

Actions Taken to Comply

ï¿½ Argentina complied with the ruling when it took measures to ensure that
its specific duties on textiles and apparel did not exceed the equivalent of
35 percent ad valorem and when it stopped charging an ad valorem statistical
tax without upper limits and modified the tax to approximate the cost of
rendering services to importers.

Parties

Plaintiff: United States
Defendant: Australia

Outcome

ï¿½ A WTO panel ruled that Australia improperly provided an export subsidy and
recommended that the subsidy be withdrawn.

Major Case Issues

ï¿½ The United States brought a case against Australia for improperly
providing export subsidies to an Australian automotive leather manufacturer.
After initial consultations, Australia agreed to remove the export subsidy
but subsequently provided a new package of subsidies-- including a loan and
a grant package on preferential and
non-commercial terms--specifically for this leather manufacturer. The United
States then brought a second dispute settlement case against this new
measure.

ï¿½ Australia argued that the loan and grant contracts were not covered by the
WTO Subsidies agreement.

Case Resolution

ï¿½ The panel ruled that the Australian loan was not an export subsidy under
the Subsidies agreement but that the grant was an export subsidy. The panel
further recommended that the measure be withdrawn within 90 days.

ï¿½ Australia agreed to comply, but the United States did not deem its
response to be adequate and requested a compliance review. The panel then
ruled that Australia had failed to withdraw the prohibited subsidy within
the specified 90 day period.

Actions Taken to Comply

ï¿½ After the compliance review panel ruling, Australia and the United States
mutually agreed to resolve the compliance issue through negotiations. The
negotiations concluded with the Australian company agreeing to partially
repay the subsidy and Australia agreeing to exclude the industry from
current and future subsidy programs.

Parties

Plaintiffs: India, Malaysia, Pakistan, Thailand
Defendant: United States

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against the United States.
The United States took several steps, including changing its procedural
guidelines to comply with the ruling.

Major Case Issues

ï¿½ The complainants contested the partial U.S. embargo on the importation of
certain shrimp and shrimp products from countries that had not been
certified by the Department of State as having a comprehensive sea turtle
conservation regime. Notably, they argued that the embargo was not a
conservation measure as envisioned under GATT 1994 article XX and that the
United States did not have a right to take unilateral measures to protect a
resource not in its territory.

ï¿½ The United States argued that the measure was a justifiable restriction on
importation of shrimp under article XX, which, the United States said,
contains no express or implied jurisdictional limitations. It further said
that the embargo was a permitted conservation measure designed to protect an
endangered species (sea turtles), considered to be a shared global resource.

Case Resolution

ï¿½ The WTO panel found, in part, that the U.S. measure was not justified
under article XX because the measure met the panel's test of being a "risk
to the multilateral trading system." The United States appealed the ruling
and the test, arguing the panel was impermissibly elevating commercial
considerations above those enunciated in article XX.

ï¿½ The Appellate Body rejected the panel's test and found that the U.S.
measure fell within the scope of article XX because it was related to the
conservation of an exhaustible natural resource, and a sufficient connection
existed between the resource and U.S. interests protected under article XX.
However, the Appellate Body also found the U.S. measure did not qualify for
an exception because it had been applied in an arbitrary and discriminatory
manner.

Actions Taken to Comply

ï¿½ While restrictions on imports of shrimp from noncertified countries remain
in effect, the Department of State revised its guidelines to establish
greater transparency and due process in country certification decisions. It
also increased U.S. efforts to negotiate international agreements on sea
turtle protection, and offered enhanced technical assistance.

Parties

Plaintiffs: United States, Japan, European Union
Defendant: Indonesia

Outcome

ï¿½ A WTO panel ruled against Indonesia, and Indonesia eliminated its
WTO-inconsistent measures.

Major Case Issues

ï¿½ The United States complained that Indonesia maintained certain benefits
for manufacturers of autos and auto parts in the form of reduced duties on
imports and a reduction or elimination of taxes on the sale of motor
vehicles. These benefits were conditioned on compliance with domestic and
local content requirements and, in some cases, the use of an Indonesian
trademark.

ï¿½ The United States considered these benefits to violate WTO provisions on
subsidies, most-favored-nation treatment (that imported goods from different
countries should receive equal treatment), national treatment (that imported
products should be treated no less favorably than domestic goods),
investment measures that distort trade, and intellectual property
protection.

Case Resolution

ï¿½ The panel ruled that various aspects of Indonesia's auto policies violated
WTO provisions on national treatment, most-favored-nation treatment, and
investment provisions that distort trade. It also concluded that the
subsidies provided under the auto program caused serious prejudice to the
European Union and should be withdrawn or modified.

Actions Taken to Comply

ï¿½ Indonesia eliminated its measures.

Parties

Plaintiff: United States
Defendant: European Union

Outcome

ï¿½ The panel ruling supported the EU on one issue and the United States on
another. The Appellate Body reversed the panel ruling that was favorable to
the United States.

Major Case Issues

ï¿½ The United States complained that EU customs authorities had reclassified
computer local area network adapter cards and personal computers with
multimedia capability into tariff categories with substantially higher
tariffs. The United States argued that it was entitled to "legitimate
expectations" that the EU would not raise the tariff for network equipment
and personal computers above the level specified in the EU tariff schedule
and that increases were inconsistent with WTO obligations.

ï¿½ The EU argued that it had never committed itself nor indicated that it
would classify the specified computer equipment in the category expected by
the United States. The EU also argued that the United States did not have a
legitimate basis to reasonably expect that these products would be provided
treatment foreseen under relevant tariff headings of the tariff schedules,
because during Uruguay Round negotiations there was no uniform treatment
within EU member states for these products.

Case Resolution

ï¿½ The panel found that the EU had not acted inconsistently with WTO
obligations regarding the tariff treatment of multimedia personal computers.
However, the panel also found that the EU's failure to accord imports of
local area network equipment from the United States treatment no less
favorable than that provided in its tariff schedules was inconsistent with
WTO obligations.

ï¿½ The Appellate Body reversed the panel's ruling with regard to local area
network equipment and did not find that the EU had provided the United
States with less favorable treatment than required by its tariff schedules
for this equipment.

ï¿½ The Appellate Body reversed the panel's finding that the United States was
entitled to "legitimate expectations" that local area network equipment
would be accorded the tariff treatment provided to automatic data processing
equipment.

Actions Taken to Comply

ï¿½ No action required, but as part of its commitments under the Information
Technology Agreement the EU eliminated tariffs on all local area network
equipment.

Parties

Plaintiff: European Union
Defendant: United States

Outcome

ï¿½ The case was resolved by action taken by the Department of Commerce prior
to the establishment of a WTO panel.

Major Case Issues

ï¿½ The EU complained that the Department of Commerce had not completed its
changed circumstances review of an antidumping order on imports of urea from
the former German Democratic Republic. Urea is a chemical compound used as
fertilizer. The EU argued that Commerce should revoke the order because the
German Democratic Republic no longer existed.

ï¿½ In its preliminary changed circumstances determination, Commerce decided
that the original order should be applied only to urea imports from the
former states of the German Democratic Republic. Commerce, however, had not
yet issued its final determination.

Case Resolution

ï¿½ U.S. laws permit Commerce to revoke an antidumping order if domestic
industry no longer has an interest in maintaining the order. In this case,
U.S. industry filed a "letter of no further interest" in the urea
antidumping order, and Commerce then revoked the order.

Actions Taken to Comply

ï¿½ No action necessary.

Parties

Plaintiff: United States
Defendant: Philippines

Outcome

ï¿½ The United States and the Philippines negotiated a resolution to the
dispute prior to a WTO panel decision.

Major Case Issues

ï¿½ In its request for consultations, the United States complained that
Philippine regulations on administration of its tariff-rate quotas46
discouraged imports by allocating 85 percent of pork and 99 percent of
poultry import licenses to Philippine producers of those commodities, even
though Philippine producers failed to utilize their import permits. The
United States asserted that the administration of the quotas violated a
number of WTO provisions.

Case Resolution

ï¿½ The Philippines and the United States negotiated an understanding
resolving the dispute. In February 1998, the Philippines implemented the
understanding by modifying an administrative order dealing with the
tariff-rate quota system for pork and poultry. The new system discourages
firms from holding import licenses if they fail to make use of them.

Actions Taken to Comply

ï¿½ No action required.

Parties

Plaintiff: United States
Defendant: Japan

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against Japan. Japan
eliminated the import measures in question.

Major Case Issues

ï¿½ The United States complained that Japan's varietal testing requirement was
inconsistent with the WTO sanitary/phytosanitary agreement, in part because
the measure was not based on scientific principles or a risk assessment, was
not transparent, and was more trade restrictive than necessary.

ï¿½ Japanese law prohibits the importation of certain agricultural products47
because of their potential to host coddling moth, which is not found in
Japan. The prohibition can be lifted, however, if an exporting country can
demonstrate that an alternative quarantine method achieved the same level of
protection as the ban.

ï¿½ Japan developed guidelines as model test procedures to confirm the
efficacy of alternative methods. The guidelines outlined the testing
requirements for the initial lifting of the import ban on a product and the
testing requirements for approval of additional varieties of the product.

ï¿½ Japan claimed that its policy was fully consistent with the
sanitary/phytosanitary agreement and was entirely based on plant health
considerations.

Case Resolution

ï¿½ The WTO panel found Japan's varietal testing requirement to be
inconsistent with the WTO sanitary/phytosanitary agreement in a number of
respects and recommended that the WTO request that Japan bring its measures
into conformity with its obligations under that agreement.

ï¿½ The Appellate Body review generally upheld the panel's finding that
Japan's varietal testing requirement was inconsistent with its WTO
obligations.

Actions Taken to Comply

ï¿½ Japan eliminated its varietal testing requirement.

ï¿½ The United States and Japan continue to negotiate about the provisions of
the quarantine measure that will replace the former requirement.

Parties

Plaintiff: European Union
Defendant: United States

Outcome

ï¿½ The United States and the EU negotiated a solution to the dispute. The
United States passed legislation to clarify its rules of origin.

Major Case Issues

ï¿½ The EU complained that U.S. changes to its rules of origin for textiles
and apparel products, in particular those in section 334 of the Uruguay
Round Agreements Act,48 adversely affected exports of EU fabrics, scarves,
and other flat textile products to the United States. These products were no
longer recognized in the United States as being of European origin and thus
lost the quota-free access to the U.S. market that they had previously
enjoyed.

Case Resolution

ï¿½ The EU and the United States reached a mutually agreed solution to the
dispute. Specifically, the United States agreed that it would propose
legislation that would restore its prior rules of origin for silk
accessories, dyed and printed cotton fabrics, and related products.

ï¿½ When U.S. legislation was not enacted, the EU subsequently requested
additional consultations. The United States then agreed to propose specific
legislation amending U.S. rules of origin.

Actions Taken to Comply

ï¿½ The United States recently enacted legislation that would implement the
rules of origin changes agreed to with the EU.49

Parties

Plaintiff: United States
Defendant: Korea

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against Korea.

Major Case Issues

ï¿½ The United States complained that Korea imposed lower internal taxes on
soju (a type of alcohol) than on other distilled spirits and liquors, such
as vodka, rum, gin, whisky, and brandy, under its liquor tax laws. The
United States considered the lower tax rate to violate the WTO principle of
national treatment (that foreign goods should not be taxed less favorably
than domestic goods).

ï¿½ Korea disagreed with this claim and argued, among other things, that soju
did not compete with these other alcoholic beverages.

Case Resolution

ï¿½ The WTO panel and the Appellate Body both ruled that Korea's tax laws did
violate the WTO national treatment provision because soju and whiskies,
brandies, cognac, rum, gin, vodka, tequila, liqueurs, and admixtures are
directly competitive or substitutable products. Therefore, both bodies
recommended that Korea should bring its laws into conformity with its
national treatment obligations under GATT 1994.

Actions Taken to Comply

ï¿½ After arbitration on the "reasonable period of time" for Korea to come
into compliance, Korea complied by setting a flat tax rate across all
distilled alcoholic beverages. Korea did this by increasing its taxes on
domestic products rather than lowering them significantly on imported goods.

Parties

Plaintiff: United States
Defendant: Sweden

Outcome

ï¿½ The United States and Sweden negotiated a mutually agreed solution
resolving the dispute prior to a WTO panel decision.

Major Case Issues

ï¿½ The United States complained that Sweden failed to make available
provisional measures in civil proceedings involving intellectual property,
as required by TRIPS, such as providing its authorities with the power to
order surprise searches and seizures for relevant evidence. The U.S. action
was intended to address problems involving end-use piracy of computer
software.

Case Resolution

ï¿½ The United States and Sweden negotiated a solution in which Sweden
indicated that it had passed legislation granting Swedish courts authority
to order searches and seizures, including surprise searches, for evidence in
civil proceedings involving infringements of intellectual property rights.

Actions Taken to Comply

ï¿½ The parliament of Sweden passed legislation on November 25, 1998, amending
Sweden's intellectual property rights laws.

Parties

Plaintiff: Korea
Defendant: United States

Outcome

ï¿½ Korea withdrew its request for a WTO panel after the U.S. Department of
Commerce revoked the antidumping order in question.

Major Case Issues

ï¿½ Korea complained that the United States determined not to revoke a
long-standing antidumping order on the importation of color television
receivers with respect to the Korean manufacturer Samsung.

ï¿½ Prior to the WTO case, the Department of Commerce had determined that it
could not complete the revocation review until it completed a separate
review of a petition arguing that Korea was circumventing the antidumping
order by assembling color television receivers in Mexico and then exporting
them to the United States.

Case Resolution

ï¿½ Korea withdrew its request for a WTO panel after Commerce ceased its
review on the circumvention issue due to lack of domestic industry interest
and subsequently revoked the Samsung antidumping order.

Actions Taken to Comply

ï¿½ No action required.

Parties

Plaintiff: United States
Defendant: India

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against India. India
negotiated an agreement to remove all quantitative import restrictions by
April 2001.

Major Case Issues

ï¿½ The United States complained that quantitative restrictions maintained by
India (import prohibitions, bans, restrictions, licenses, etc.) on more than
2,700 agricultural and industrial products violated India's WTO obligations.

ï¿½ India justified these restrictions under a WTO provision allowing certain
actions to protect a country's balance-of-payments situation. India proposed
to phase out these measures over a 7-year period; however, no agreement was
reached on this proposal.

Case Resolution

ï¿½ The panel upheld the U.S. position that India's quantitative restrictions
violated WTO prohibitions. It also concluded that these measures were not
justified under WTO provisions allowing a member to protect its balance of
payments and that India had no right to phase out these measures.
Nevertheless, the panel stated that India did not need to remove the
measures immediately and suggested a negotiated implementation/phase-out
period that could be longer than the normal 15-month period of reasonable
time to implement a panel recommendation.

ï¿½ India appealed several of the panel's rulings, including whether panels
have the authority to review justification of balance-of-payments
restrictions. India suggested that this authority lay with the WTO
Balance-of-Payments Committee and the General Council. The Appellate Body
upheld the panel on the issues appealed and found that the panel had the
authority to review India's justification for its
balance-of-payments restrictions.

Actions Taken to Comply

ï¿½ The United States and India agreed that India would eliminate all
quantitative restrictions by April 2001. Most of the measures had been
removed by April 2000.

Parties

Plaintiff: Korea
Defendant: United States

Outcome

ï¿½ The WTO panel ruled against the United States on one issue. Korea is
challenging U.S. compliance.

Major Case Issues

ï¿½ Korea sought the revocation of an antidumping order on Korean dynamic
random access memory semiconductors with respect to two producers. Korea
claimed that despite the absence of dumping for more than 3 consecutive
years, the United States had not performed a proper revocation review. They
claimed that the United States had not established the likelihood of dumping
in the future and should therefore revoke the dumping order on Korean
dynamic random access memory semiconductors as a remedy. The Koreans also
challenged a series of U.S. procedures, including the Department of
Commerce's standard for revoking an antidumping order.

Case Resolution

ï¿½ The WTO panel held that the U.S. standard for revoking an antidumping
order was WTO inconsistent. Specifically, the regulatory requirement that
Commerce find it "not likely" that dumping would occur in the future was
inconsistent with U.S. obligations under the WTO antidumping agreement. The
panel further found that since the procedure was flawed, the U.S. decision
in the revocation review was also inconsistent. However, the panel rejected
all of Korea's other claims, including the request that the panel suggest
revocation of the antidumping order as the appropriate remedy.

Actions Taken to Comply

ï¿½ Commerce amended its antidumping regulations, deleting the "not likely"
standard and replacing it with a requirement that the Secretary of Commerce
consider "whether the continued application of the antidumping duty order is
otherwise necessary to offset dumping." Once the regulation had been
changed, Commerce proceeded to conduct a new review of the revocation
request. Commerce determined in this new review that because future dumping
was likely, continued application of the antidumping duty order was
necessary.

ï¿½ Korea challenged the sufficiency of the U.S. compliance efforts. As of
July 1, 2000, the WTO panel had not ruled on the issue.

Parties

Plaintiff: European Union
Defendant: United States

Outcome

ï¿½ The EU and the United States reached a mutually agreed solution resolving
the dispute prior to a WTO panel decision.

Major Case Issues

ï¿½ In April 1997, the United States imposed a ban on imports of poultry and
poultry products from the EU. The United States maintained that the ban was
necessary because EU authorities had failed to cooperate in determining
whether EU health and safety measures for the marketing of these products
provided levels of protection equivalent to new, more stringent standards
adopted by the United States.

ï¿½ The EU argued that the United States had failed to clarify the grounds
upon which EU poultry and poultry products had become ineligible for entry
into the U.S. market.

Case Resolution

ï¿½ The United States obtained EU cooperation in performing an audit of EU
regulatory procedures for handling and marketing poultry products. The audit
concluded that the EU poultry processing facilities and regulations did
indeed provide a level of protection equivalent to that set forth under U.S.
guidelines.

ï¿½ Following the audit, the United States lifted the poultry ban by
administrative action in August 1997.

Actions Taken to Comply

ï¿½ No action required.

Syrup

Parties

Plaintiff: United States
Defendant: Mexico

Outcome

ï¿½ A WTO dispute settlement panel ruled that Mexico improperly conducted its
analysis in making an antidumping determination. Mexico has agreed to comply
with the panel's ruling.

Major Case Issues

ï¿½ The United States brought a WTO complaint against Mexico alleging that
Mexico had improperly initiated and investigated an antidumping case on
imports of U.S. high fructose corn syrup. The United States argued, among
other things, that Mexico had not conducted a proper threat of injury
analysis because it had not considered both consumer and industrial sugar
use in its analysis.

ï¿½ Mexico argued that it had the right to initiate the dumping investigation
and that its methodology for determining threat of injury was proper.

Case Resolution

ï¿½ Although the panel found that Mexico's initiation of the antidumping
investigation was consistent with its WTO obligations, it ruled that
Mexico's threat of injury determination was inconsistent for several
reasons. First, Mexico inadequately considered the impact of dumped imports
on its domestic industry in part by considering the impact on only a portion
of the industry rather than on the whole industry. Second, Mexico did not
properly determine that there was a likelihood that high fructose corn syrup
imports from the United States would increase. In addition, the panel found
several other instances of improper Mexican actions: applying its
provisional antidumping measure for too long a period of time, and applying
its final measures retroactively.

Actions Taken to Comply

ï¿½ Mexico has agreed to comply with the panel ruling by September 2000.

Parties

Plaintiffs: United States and New Zealand
Defendant: Canada

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against Canada regarding
its dual pricing system for dairy imports and the administration of its
tariff-rate quota for milk. Canada is taking action to comply.

Major Case Issues

ï¿½ The United States and New Zealand challenged Canada's system of
differential milk prices for domestic and export markets. These countries
insisted that the system was in fact an export subsidy. The United States
also challenged Canada's administration of its TRQ for fluid milk. As part
of its Uruguay Round commitments, Canada had agreed to reduce subsidies for
dairy exports and to establish a TRQ for fluid milk. In 1995, Canada
implemented its new dairy export policy eliminating direct government
subsidies for exports; however, the new policy established a system of
differential pricing of milk based on its end-use in domestic or export
markets.

ï¿½ Canada argued that the pricing system was producer run and overseen by
provincial marketing boards, without government involvement. Thus, it was
simply a market-driven arrangement for exports, not a subsidy. Canada also
argued that the TRQ for liquid milk was filled by
cross-border purchases and there was no need to allow for commercial
shipments of liquid milk imports.

Case Resolution

ï¿½ The panel and the Appellate Body ruled in favor of the complainants with
regard to the subsidy issue. The Appellate Body also found that the Canadian
dual-pricing scheme was in fact an export subsidy, even though the
government of Canada was not directly funding the arrangement. Consequently,
Canada would have to count exports under this arrangement against its
subsidy ceiling set in the Uruguay Round.

ï¿½ The Appellate Body found that Canada could count cross-border consumer
traffic of liquid milk against its TRQ commitment. However, Canada had to
lift its $20 limit on consignments of liquid milk consumers may bring over
the border.

Actions Taken to Comply

ï¿½ Canada lifted (by administrative action) the $20 limit on individual,
cross-border consignments of fluid milk. Canada has agreed to come into
compliance with the ruling on subsidies by the end of 2000.

Parties

Plaintiff: European Union
Defendant: United States

Outcome

ï¿½ Both the WTO panel and the Appellate Body ruled against the United States.

Major Case Issues

ï¿½ The EU complained that the U.S. Foreign Sales Corporations (FSC)50 program
provides export subsidies and import substitution subsidies prohibited by
the WTO subsidies agreement because (1) it exempted from direct taxes a
portion of income related to exports and dividends distributed to U.S.
parent companies, (2) it required that the program's tax exemption be
limited to receipts from the export of products having at least 50-percent
U.S. origin by market value, and (3) its administrative pricing rules gave
companies several options for allocating income between the foreign sales
corporation and the parent company. The EU also alleged that the program is
an export subsidy that violated the Agreement on Agriculture.

ï¿½ The United States responded that the FSC program was not an export subsidy
and that under its WTO obligations, foreign-source income may be exempt from
taxation or taxed to a lesser extent than
domestic-source income. The United States asserted that the program's
provisions were intended to provide a limited, territorial-type system of
taxation for U.S. exports, comparable to that received by EU firms. The
United States argued that agreements reached under GATT prior to the
formation of the WTO exempted the FSC program.

Case Resolution

ï¿½ The panel and Appellate Body found that the FSC tax exemption measure was
a prohibited subsidy under the Subsidies agreement because the benefits
constituted revenues otherwise due to the government and were contingent on
export performance.

ï¿½ The Appellate Body also found that the United States had acted
inconsistently with its obligations under the Agreement on Agriculture by
applying export subsidies in a way that circumvented or could circumvent its
export subsidy commitments for agriculture products.

ï¿½ Neither the panel nor the Appellate Body ruled on the 50-percent U.S.
origin requirement or the FSC administrative pricing rules.

Actions Taken to Comply

ï¿½ The United States has until October 1, 2000, to comply with the panel
ruling.

Parties

Plaintiff: Canada
Defendant: United States

Outcome

ï¿½ Canada and the United States reached an agreement resolving the dispute
prior to a WTO panel decision.

Major Case Issues

ï¿½ In its request for consultations, Canada complained that new inspection
requirements imposed by Idaho, Montana, North and South Dakota, Nebraska,
and Minnesota on Canadian trucks carrying cattle, hogs, and grain passing
through their states violated various WTO provisions. A number of trucks
that failed to meet the new requirements were denied access to these states.
Canada claimed that the state inspections were unjustified because Canadian
livestock and grain exports had already met all U.S. federal health and
safety requirements.

ï¿½ The states claimed the inspections were undertaken for health and safety
purposes.

Case Resolution

ï¿½ In October 1998, the five states involved in the dispute with Canada
agreed to suspend their inspections, and in December 1998 the United States
and Canada reached a bilateral agreement on the matter. In addition to the
suspension of the inspections, the agreement provided for improved U.S.
access to the Canadian market for live animals and grains by reducing
burdensome Canadian plant and animal health requirements. Canada also agreed
to regular consultations on U.S. grain exports to ensure that they are
priced fairly.

Actions Taken to Comply

ï¿½ The governors of the states involved suspended inspections.

Parties

Plaintiff: European Union
Defendant: United States

Outcome

ï¿½ The WTO panel ruled in favor of the United States.

Major Case Issues

ï¿½ The EU complained that by adopting and applying sections 301-310 of the
U.S. Trade Act of 1974,51 the United States breached an understanding that
in exchange for other Uruguay Round participants agreeing to automatic
adoption of WTO panel and Appellate Body reports and authorization of
members to suspend concessions, the United States would abandon its
long-standing policy of taking unilateral action against foreign trade
barriers. More particularly, the EU claimed that a number of specific,
strict time limits in sections 304-306 did not allow the United States to
comply with WTO dispute settlement rules and GATT 1994 obligations.

ï¿½ The United States responded that the EU had brought a political case based
on a series of assumptions adverse to the United States. The United States
contended that sections 301-310 permit it to comply with dispute settlement
rules and procedures in every case: section 304 permits the USTR to base his
or her determinations on adopted panel findings, and sections 305 and 306
permit the USTR to request and receive WTO authorization to suspend
concessions.

Case Resolution

ï¿½ The panel found that the terms of sections 304-306, considered alone, were
inconsistent with dispute settlement rules by providing the United States
with discretion to make certain determinations before the completion of
panel proceedings. However, this inconsistency was removed by the Statement
of Administrative Action accompanying the Uruguay Round Agreements Act and
U.S. representations to the panel that USTR would base any section 301
determination that there has been a violation or denial of U.S. rights under
a WTO agreement on a dispute settlement finding.

ï¿½ Notwithstanding these rulings, the panel stated that should the relevant
U.S. representations both in the Statement of Administrative Action and
before the panel be repudiated, its findings of conformity between the
provisions in sections 304-306 and U.S. WTO obligations would no longer be
warranted.

Actions Taken to Comply

ï¿½ No action required.

Commercial Significance of 42 U.S. WTO Dispute Settlement Cases

We examined the commercial stakes and outcomes of each of the 42 completed
dispute settlement cases involving the United States (see
app. III for more information on our methodology). Table 2 presents a
summary of the commercial outcome of the cases, while table 3 presents a
short description of each of these cases, giving information--when
available--on the particular barriers or measures contested, the market
size, the relevant trade or investment involved, and other indicators of the
commercial relevancy of the cases to the United States.

  GAO case
   number             Case name               Commercial outcome of case
                                           Primarily environmental
 1          U.S. regulations affecting     concerns; economic effects
            gasoline imports
                                           limited
                                           U.S. achieved commercial
 2          Korea's agricultural           benefits through greater market
            shelf-life standards
                                           access
                                           Potentially high commercial
 3          U.S. import duties on          stakes, but outcome had limited
            automobiles from Japan
                                           or no commercial effect
                                           U.S. achieved commercial
 4          Japan's taxes on distilled     benefits through greater market
            spirits
                                           access
                                           U.S. achieved commercial
 5          European Union grain tariffs   benefits through greater market
                                           access

 6          European Union banana import   Limited commercial benefits
            regime                         because defendant did not comply

 7          U.S. underwear import          Restraints removed, with limited
            restraint                      commercial effect

 8          European Union ban on meat     Limited commercial benefits
            from hormone-treated animals   because defendant did not comply
                                           U.S. achieved commercial
 9          Japan sound recordings         benefits through stronger
                                           intellectual property protection
                                           U.S. achieved commercial
 10         Canada's measures on magazines benefits through greater market
                                           access

 11         U.S. wool coat import          Restraints removed, with limited
            restraint                      commercial effect

 12         U.S. wool shirt import         Restraints removed, with limited
            restraint                      commercial effect
                                           Limited commercial benefits
 13         Hungary's agricultural export  because challenge brought
            subsidies                      primarily to uphold trade
                                           principles
                                           U.S. achieved commercial
 14         Pakistan patent mailbox        benefits through stronger
            provision
                                           intellectual property protection
                                           U.S. achieved commercial
 15         Portugal patent protection     benefits through stronger
                                           intellectual property protection
                                           Potentially high commercial
 16         U.S. Helms-Burton Act          stakes, but outcome had limited
                                           or no commercial effect
                                           Potentially high commercial
 17         U.S. tariff retaliation on     stakes, but outcome had limited
            European Union products
                                           or no commercial effect
                                           U.S. achieved commercial
 18         Turkey's taxation of foreign   benefits through greater market
            films
                                           access

 19         Japan's import measures        U.S. failed to achieve greater
            affecting film                 market access
            U.S. antidumpinga              Potentially high commercial
 20         investigation on Mexican       stakes, but outcome had limited
            tomatoes                       or no commercial effect
                                           U.S. achieved commercial
 21         India patent mailbox provision benefits through stronger
                                           intellectual property protection
                                           Limited commercial benefits
 22         Brazil's automobile regime     because challenge brought
                                           primarily to uphold trade
                                           principles

 23         Argentina duties on textiles,  Limited commercial benefits due
            apparel, and footwear          to other barriers

 24         Australia automotive leather   Limited commercial benefits
            export subsidies               partly due to delayed compliance

 25         U.S. ban on shrimp imports to  Primarily environmental rather
            protect turtles                than economic concerns
                                           U.S. achieved commercial
 26         Indonesia automobile and auto  benefits through greater market
            parts measures
                                           access
            European Union customs         Despite losing case, market
 27         classification of computer     access maintained through
            equipment                      separate agreement

 28         U.S. antidumping order on urea Duties removed, with limited
                                           commercial effect
                                           U.S. achieved commercial
 29         Philippines pork and poultry   benefits through greater market
            tariff-rate quotasb
                                           access
                                           U.S. achieved commercial
 30         Japan's measures affecting     benefits through greater market
            fruit imports
                                           access

 31         U.S. textiles and apparel      Settled, with limited commercial
            rules of origin                effect

 32         Korea's taxes on distilled     Limited commercial benefits due
            spirits                        to other barriers
                                           U.S. achieved commercial
 33         Sweden's civil procedures for  benefits through stronger
            intellectual property
                                           intellectual property protection

 34         U.S. antidumping order on      Duties removed, with limited
            color television receivers     commercial effect
                                           U.S. achieved commercial
 35         India's quantitative import    benefits through greater market
            restrictions
                                           access

 36         U.S. antidumping order on      Limited or no commercial effect
            Korean semiconductors          because duties maintained

 37         U.S. ban on imports of         Ban removed, with limited
            European poultry               commercial effect
            Mexico's antidumping
 38         determination on high fructose Implementation deadline not yet
            corn syrup                     passed

 39         Canada dairy subsidies and     Limited commercial benefits
            quotas                         because other barriers existed
                                           Potentially high commercial
 40         U.S. tax treatment for foreign stakes, but implementation
            sales corporations
                                           deadline not yet passed

 41         U.S. imports of Canadian       Measures removed, with limited
            cattle, swine, and grain       commercial effect

 42         Provisions of the U.S. Trade   Potentially high commercial
            Act of 1974                    stakes, but U.S. prevailed

aAntidumping duties are imposed on imports to neutralize the injurious
effect of unfair pricing practices known as "dumping."

bA tariff-rate quota is the application of a lower tariff rate for a
specified quantity of imported goods. Imports above this specified quantity
face a higher tariff rate.

Source: GAO analysis.

  GAO case
  number             Case name                Commercial significance
                                         This dispute involved
                                         Environmental Protection Agency
                                         environmental regulations on
                                         imports of finished gasoline
                                         products. Imports of finished
                                         gasoline account for generally
                                         less than 5 percent of the more
                                         than $2 billion U.S. market, and
                                         the particular imports entering
                                         the market under the modified
                                         rules account for only 0.18
                                         percent of the market. Also, the
                                         regulation remains in place with
                                         modifications, so the economic
                                         effects of the outcome of this
 1          U.S. regulations affecting   dispute are likely to be limited
            gasoline imports
                                         for the United States. However,
                                         for the East Coast, imports of
                                         finished gasoline have typically
                                         represented between 10 and 20
                                         percent of supplies. Also, imports
                                         have fluctuated somewhat over the
                                         past 4 years, and the regulation
                                         may have affected the choice of
                                         suppliers from which the United
                                         States imports. For certain
                                         importers, such as Venezuela,
                                         whose largest market is the United
                                         States, the commercial
                                         consequences of the dispute are
                                         potentially important.
                                         This dispute involved a U.S.
                                         challenge of Korea's determination
                                         of shelf-life standards for
                                         several types of agricultural
                                         products. Korean requirements
                                         adversely affected vacuum-packed
                                         chilled beef and pork; frozen
                                         meat; other frozen foods; and
                                         other dried, packaged, canned, or
                                         bottled products. The Department
                                         of Agriculture's Economic Research
                                         Service estimated, based on
                                         Japanese meat consumption and
                                         demographics as proxies for Korea,
 2          Korea's agricultural         that losses for chilled beef were
            shelf-life standards
                                         between
                                         $87 million and $99 million and
                                         for chilled pork were between $79
                                         million and $156 million in 1994.
                                         The United States and Korea
                                         resolved this dispute through
                                         consultations, and Korea modified
                                         its shelf-life requirements. Korea
                                         is one of the U.S.' top markets
                                         for exports of beef and pork
                                         products, receiving about 17
                                         percent (about $350 million) of
                                         U.S. worldwide exports of these
                                         products in 1999.
                                         This dispute involved a Japanese
                                         challenge of U.S. import duties to
                                         be imposed on imports of Japanese
                                         luxury vehicles. Under section 301
                                         of the 1974 U.S. Trade Act, the
                                         USTR had determined that the
                                         Japanese government had
                                         constructed barriers to U.S.
                                         exports in the Japanese
                                         "aftermarket" for replacement auto
                                         parts and accessories that were
                                         burdening or restricting U.S.
 3          U.S. import duties on        commerce. It was announced that
            automobiles from Japan       100 percent duties were to be
                                         placed on specific luxury models
                                         of Honda, Toyota, and other
                                         Japanese exports valued at $5.9
                                         billion in 1994. After two rounds
                                         of bilateral negotiations, the
                                         United States and Japan announced
                                         a bilateral agreement on autos and
                                         auto parts. This bilateral
                                         agreement resolved the U.S.
                                         section 301 case, and Japan did
                                         not pursue its WTO challenge to
                                         the duties.
                                         This dispute had commercial
                                         benefits for the United States.
                                         Japan is one of the leading export
                                         markets for U.S. distilled
                                         spirits, receiving about 18
                                         percent ($77 million) of U.S.
                                         exports of these products in 1999.
                                         As a result of the settlement, tax
                                         rates on whiskey and other
                                         distilled spirits were reduced,
 4          Japan's taxes on distilled   and tariffs on these products are
            spirits                      being eliminated at an accelerated
                                         rate beginning in 1997. The U.S.
                                         industry has expressed
                                         satisfaction with the outcome,
                                         estimating $94 million in annual
                                         tax and tariff savings. Between
                                         1997 and 1998, exports of whiskey
                                         (the largest U.S. distilled spirit
                                         export to Japan) increased by 18
                                         percent ($10 million) to $67
                                         million.
                                         This dispute concerned the EU's
                                         calculation of duties on U.S.
                                         exports of grains (such as rice,
                                         wheat, rye, barley, corn, and
                                         sorghum). The United States was
                                         concerned about U.S. access of
                                         high-value rice and certain barley
                                         exports to the EU. The dispute was
                                         resolved in 1997, with the EU
                                         agreeing to modify its system and
                                         to rebate excessive charges and
                                         reduce tariffs on certain rice
                                         exports. The EU imported over $300
                                         million in U.S. grains in 1999.
 5          European Union grain tariffs U.S. exports of the particular
                                         rice affected by the higher duties
                                         ranged between $50 million and $75
                                         million annually from 1996 through
                                         1999. Also, the EU accounted for
                                         13 percent of U.S. rice exports
                                         and was the U.S.' third largest
                                         regional market after North
                                         America and Japan in 1999. In
                                         addition to changes made for rice
                                         exports, the EU also agreed to
                                         establish a tariff-rate quota for
                                         barley imports intended to
                                         maintain market access for U.S.
                                         exports.
                                         This dispute involved restrictions
                                         on the access and marketing of
                                         bananas from certain countries by
                                         the EU that the United States
                                         (along with four other countries)
                                         challenged as WTO inconsistent.
                                         The case affects the interests of
                                         U.S. companies that distribute
                                         bananas in the EU. The WTO agreed
                                         with the arguments of the
 6          European Union banana import plaintiffs and requested that the
            regime
                                         EU modify its banana regime.
                                         Following some changes the EU
                                         made, the WTO ruled that these
                                         were insufficient, determining
                                         that damages to the United States
                                         from the EU's regime amounted to
                                         $191.4 million. This is the amount
                                         of retaliation the WTO authorized
                                         the United States to impose on EU
                                         exports to the United States.
                                         This dispute involved Costa Rica's
                                         challenge to a U.S. import
                                         restraint on underwear. The U.S.
                                         Committee for the Implementation
                                         of Textile Agreements found that
                                         certain imports of Costa Rican
                                         underwear were causing serious
                                         damage to the U.S. industry and
                                         decided to impose an import
                                         restraint. Imports of these
                                         products in 1994 were
                                         approximately $87 million,
                                         accounted for 15 percent of all
                                         imports of underwear, and were up
 7          U.S. underwear import        22 percent in terms of quantity
            restraint                    over the previous year. Imports of
                                         Costa Rican underwear were
                                         equivalent to about 8.8 percent of
                                         U.S. underwear production in the
                                         year ending September 1994. Costa
                                         Rica appealed the decision to the
                                         Textile Monitoring Body, which did
                                         not find serious damage and could
                                         not reach a consensus on whether
                                         there was a threat of serious
                                         damage. The restraint remained in
                                         place for 2 years but was allowed
                                         to expire, as a result of a WTO
                                         decision against the United States
                                         .
                                         This dispute is part of a
                                         long-running quarrel between the
                                         United States and the EU over EU
                                         restrictions on imports of beef
                                         produced from hormone-treated
                                         cattle. The United States
                                         originally challenged this ban
                                         through section 301 sanctions in
                                         1989, then through the WTO dispute
 8          European Union ban on meat   settlement procedures in 1996. The
            from hormone-treated animals
                                         WTO agreed with the arguments of
                                         the United States that the EU had
                                         improperly restricted imports and
                                         set a damage figure of $116.8
                                         million. This is the amount of
                                         retaliation that the WTO
                                         authorized the United States to
                                         impose on EU exports to the United
                                         States.
                                         This dispute involved the failure
                                         of Japan to extend copyright
                                         protections for existing sound
                                         recordings back a full 50 years as
                                         the WTO agreement on intellectual
                                         property required. The successful
                                         settlement of this dispute
                                         provided direct economic benefits
                                         to the United States and may have
                                         assisted in resolving similar
                                         disputes with other countries.
                                         Based on actual sales in the
 9          Japan sound recordings       Japanese market at the time, U.S.
                                         industry estimated losses of
                                         approximately $500 million. In
                                         addition to granting protections
                                         in the large Japanese market,
                                         industry representatives cited
                                         this case as useful in securing
                                         retroactive protections in other
                                         countries for sound recordings and
                                         classic motion pictures. The U.S.
                                         recorded music industry informed
                                         USTR that it had world-wide
                                         foreign sales of over $15 billion
                                         in 1995.
                                         This dispute involved removing
                                         restrictions on access by U.S.
                                         publishers to the Canadian
                                         magazine market. In addition to
                                         Time-Warner ceasing production of
                                         a Canadian edition of Sports
                                         Illustrated, a prohibitive excise
                                         tax that Canada imposed was
                                         designed to deter entry of more
                                         than 100 potential U.S.
                                         "split-run" publications that had
                                         been identified by a Canadian task
                                         force. Under an agreement reached
                                         between Canada and the United
                                         States in 1999, Canada agreed to
                                         remove the ban and excise tax and
 10         Canada's measures on         to allow increased investment in
            magazines                    existing Canadian magazines or
                                         wholly owned new publications. The
                                         advertising revenue of magazines
                                         published in Canada was about $470
                                         million in 1996-97, according to
                                         Canada's statistical agency. The
                                         Canadian government reported in
                                         1998 imports of U.S. periodicals
                                         of about $593 million. Industry
                                         sources believe that the bilateral
                                         agreement creates new
                                         opportunities in Canada and say
                                         that the market may grow with more
                                         competition. Canada has enacted
                                         some of the changes agreed to
                                         under the agreement, while others
                                         are still pending.
                                         This dispute involved India's
                                         challenge to a U.S. import
                                         restraint on wool coats in 1995.
                                         The U.S. Committee for the
                                         Implementation of Textile
                                         Agreements found that certain
                                         imports of wool coats were causing
                                         serious damage to the U.S.
                                         industry. Imports of these
                                         products in 1994 were
                                         approximately $4.6 million, up 402
                                         percent in terms of quantity over
                                         the previous year. Indian wool
 11         U.S. wool coat import        coats accounted for 3.1 percent of
            restraint                    all imports of wool coats and were
                                         equivalent to about 4.1 percent of
                                         U.S. wool coat production for the
                                         12-month period ending in
                                         September, 1994. India referred
                                         the U.S. decision to impose an
                                         import restraint to the Textile
                                         Monitoring Body, which did not
                                         find serious damage and could not
                                         reach consensus on whether there
                                         was a threat of serious damage to
                                         U.S. industry. India dropped its
                                         WTO dispute after the United
                                         States removed the restraint.
                                         This dispute involved India's
                                         challenge to a U.S import
                                         restraint on wool shirts and
                                         blouses in 1995. The U.S.
                                         Committee for the Implementation
                                         of Textile Agreements found that
                                         certain imports of wool shirts and
                                         blouses were causing serious
                                         damage to the U.S. industry. India
                                         wool shirt and blouse imports from
                                         February 1993 through January 1994
                                         were approximately $7 million, up
                                         414 percent in terms of quantity
                                         over the previous year. Imports of
                                         wool shirts and blouses from
 12         U.S. wool shirt import       October 1993 through September
            restraint                    1994 were about equal to U.S. wool
                                         shirt and blouse production. India
                                         challenged the U.S. decision to
                                         impose an import restraint in the
                                         Textile Monitoring Body, which did
                                         find a threat of serious damage.
                                         Although India prevailed in its
                                         subsequent challenge before the
                                         WTO panel and Appellate Body, the
                                         Committee removed the restraint
                                         prior to the WTO decisions due to
                                         a steady decline in imports. U.S.
                                         imports of wool shirts and blouses
                                         from India have remained between
                                         about $1 million and $3 million
                                         annually from 1995 to 1999.
                                         This dispute involved a challenge
                                         to Hungary's failure to comply
                                         with its negotiated commitments
                                         following a change in government.
                                         The United States and several
                                         other WTO members were concerned
                                         that Hungary had increased its
                                         export subsidies for agriculture
                                         above the levels it had committed
                                         to in the Uruguay Round. The
 13         Hungary's agricultural       economic stakes for the United
            export subsidies             States were minimal. U.S.
                                         government officials pointed out
                                         that U.S. producers and exporters
                                         do not face much direct
                                         competition from Hungarian
                                         agricultural exports. However, the
                                         case was important in
                                         demonstrating that WTO members
                                         could not arbitrarily violate
                                         their export subsidy reduction
                                         commitments.
                                         This dispute involved the failure
                                         of Pakistan to establish
                                         procedures allowing companies to
                                         file patent applications on
                                         pharmaceutical and agricultural
                                         chemicals, and providing exclusive
                                         marketing rights. The successful
                                         resolution of this dispute offers
                                         potential economic benefits to the
                                         United States and may be useful in
                                         encouraging other developing
                                         countries besides Pakistan to
                                         fully enforce their WTO
 14         Pakistan patent mailbox      commitments. Less than 1 percent
            provision                    of the $8.8 billion in U.S. world
                                         exports of pharmaceuticals
                                         currently go to Pakistan ($3.3
                                         million in 1999). Estimates of the
                                         overall size or potential of the
                                         Pakistani pharmaceutical and
                                         agricultural chemical markets are
                                         not available. However, the United
                                         States is one of the leading
                                         exporters of these products, and
                                         developing countries are beginning
                                         to implement stronger intellectual
                                         property protections as part of
                                         their WTO commitments.
                                         This dispute involved Portugal's
                                         failure to provide retroactive
                                         protection for patents consistent
                                         with WTO obligations. This
                                         increase in patent terms affected
                                         approximately 7,000 patents,
                                         according to a U.S. Patent and
                                         Trademark Office official. The
 15         Portugal patent protection   United States, as a major exporter
                                         of intellectual property, should
                                         benefit economically from this
                                         change, though exact figures are
                                         not available. Less than
                                         1 percent of the $8.8 billion in
                                         U.S. world exports of
                                         pharmaceuticals currently go to
                                         Portugal
                                         ($7.7 million in 1999).
                                         This dispute involved an EU
                                         complaint about what the EU saw as
                                         the extraterritoriality of U.S.
                                         sanctions against Cuba. The EU was
                                         concerned about the commercial
                                         impact of these sanctions on EU
                                         interests. The United States has
 16         U.S. Helms-Burton Act        frequently used economic
                                         sanctions. For instance, as of
                                         1998, the United States had in
                                         effect 42 separate statutes
                                         authorizing or setting forth
                                         economic sanctions on 29
                                         countries, according to a U.S.
                                         International Trade Commission
                                         study.
                                         This dispute involved a 1996 EU
                                         challenge to duties placed on EU
                                         exports to the United States since
                                         1989. The duties were imposed
                                         under section 301 in response to
                                         the EU ban on beef from
                                         hormone-treated animals. The
                                         United States removed these duties
                                         in July 1996, citing the
                                         initiation of a challenge to the
                                         ban under the WTO's new dispute
 17         U.S. tariff retaliation on   settlement procedures. One
            European Union products
                                         estimate places the value of the
                                         duties removed at approximately
                                         $100 million, covering tomatoes,
                                         wine coolers, and beef. The WTO
                                         ruled in favor of the United
                                         States on the EU's ban on
                                         hormone-treated beef in 1998, and
                                         after the EU failed to comply the
                                         United States initiated
                                         retaliation of $116.8 million on
                                         EU exports to the United States.
                                         This dispute involved
                                         discriminatory taxes Turkey placed
                                         on foreign films. The United
                                         States challenged the 25 percent
                                         tax on foreign films, and Turkey
                                         agreed to equalize taxes across
                                         films by lowering the rate on
                                         foreign films. The U.S. industry
                                         noted that Turkey is the largest
                                         market for films in the Middle
 18         Turkey's taxation of foreign East, with 1999 revenues of $23
            films                        million. Revenues in 1998, the
                                         year following the removal of the
                                         tax, nearly doubled over the
                                         average of the previous 3 years,
                                         while the regional average only
                                         rose by
                                         10 percent. Also, the successful
                                         resolution of this dispute was
                                         cited by U.S. industry as useful
                                         in discussions with other
                                         countries with similar measures.
                                         The dispute involved large, but
                                         unrealized, economic benefits for
                                         the United States. Japan is the
                                         second largest market in the world
                                         for photographic film and paper
                                         products. In 1999 Japanese
                                         industry estimated that the size
                                         of the market was between $2.5
                                         billion and $3 billion. Kodak
                                         argued that the Japanese
                                         government had fostered barriers
                                         to market access and distribution
                                         in Japan. Kodak estimates that its
 19         Japan's import measures      exports of film account for
            affecting film
                                         approximately 7 to 10 percent of
                                         the Japanese market, whereas it
                                         commands about a 44 percent share
                                         in the rest of the world. The WTO
                                         found insufficient evidence that
                                         actions by the Japanese government
                                         had limited Kodak's access to the
                                         market. Kodak reported that in
                                         1999 it exported over $360 million
                                         in film and paper products to
                                         Japan either directly from the
                                         United States or after processing
                                         in third countries.
                                         This dispute involved Mexico's
                                         challenge to the initiation of a
                                         U.S. antidumping order on imports
                                         of fresh tomatoes. The U.S.
                                         International Trade Commission
                                         reported that imports of Mexican
                                         fresh tomatoes were $452 million,
                                         or almost 36 percent, of the $1.3
                                         billion U.S. market in 1995. The
                                         Department of Commerce and the
                                         U.S. International Trade
                                         Commission made preliminary
                                         determinations that the Mexican
                                         imports were being sold at less
            U.S. antidumping             than their fair value and were
 20         investigation on Mexican     causing material injury to the
            tomatoes                     U.S. industry. If the final
                                         determinations had upheld these
                                         findings, Commerce could have
                                         placed duties on these imports to
                                         raise their price up to the fair
                                         market value. Mexico requested WTO
                                         consultations about this issue.
                                         However, Commerce resolved the
                                         matter with a formal commitment by
                                         Mexican growers not to sell their
                                         exports below a certain price.
                                         This agreement was reached to
                                         eliminate the injurious effects of
                                         the dumped imports on the U.S.
                                         industry.
                                         This dispute involved the failure
                                         of India to establish procedures
                                         allowing companies to file patent
                                         applications on pharmaceutical and
                                         agricultural chemicals, and
                                         providing exclusive marketing
                                         rights. The successful resolution
                                         of this dispute offers potential
                                         economic benefits to the United
                                         States and may be useful in
                                         encouraging other developing
                                         countries to fully enforce their
                                         own WTO commitments. Exact
                                         estimates of the value of the
 21         India patent mailbox         Indian pharmaceutical and
            provision
                                         agricultural chemical markets are
                                         not available, but preliminary
                                         U.S. industry estimates on a
                                         limited sample of pharmaceuticals
                                         show lost sales near $100 million.
                                         Also, the Indian pharmaceutical
                                         market is one of the larger
                                         developing country markets. The
                                         United States is a major exporter
                                         of pharmaceutical products ($8.8
                                         billion in worldwide exports in
                                         1999), but less than 1 percent
                                         currently go to India ($11.4
                                         million in 1999).
                                         This dispute involved access to
                                         and investment in the Brazilian
                                         auto market by U.S. auto
                                         companies. Brazil instituted
                                         several measures under its auto
                                         program that discouraged imports
                                         by firms not invested in Brazil
                                         and provided benefits to those
                                         that were. U.S. exports of autos
                                         and auto parts to Brazil are
                                         limited, and major U.S. automakers
                                         were already invested in Brazil
                                         and receiving the benefits of the
                                         program. However, smaller U.S.
                                         firms were not invested in Brazil,
                                         and the major U.S. automakers that
                                         were had WTO-inconsistent
                                         conditions attached to their
                                         investments. Brazil resolved the
                                         dispute with the United States by
 22         Brazil's automobile regime   committing to eliminate the
                                         WTO-inconsistent aspects of the
                                         program by specific dates and to
                                         not extend the program into a
                                         Mercosura-wide auto regime. Brazil
                                         was a large recipient of U.S. auto
                                         investment. U.S. firms initiated
                                         investments in Brazil of over $2
                                         billion during 1995 and 1996 and
                                         announced plans for several
                                         billion more by this year. Those
                                         investments were primarily for
                                         production and sale of autos and
                                         auto parts in Brazil and the South
                                         American regional economy. U.S.
                                         auto and auto parts exports to
                                         Brazil in 1998 were $101 million
                                         and $954 million,
                                         respectively--only 0.4 and 2
                                         percent of U.S. worldwide exports
                                         of these products.
                                         This dispute involved a U.S.
                                         challenge of Argentina's
                                         calculation of duties and
                                         imposition of taxes on U.S.
                                         exports of various textiles,
                                         apparel, and footwear. The WTO
                                         found in favor of the United
                                         States, and Argentina complied
                                         with the decision. Duties that
                                         were previously above Argentina's
 23         Argentina duties on textiles 35-percent tariff commitment must
            apparel, and footwear        conform to this level, and a
                                         statistical tax was found
                                         inconsistent. Argentina complied
                                         by replacing the WTO-inconsistent
                                         duties with ones that met their
                                         obligations and by raising lower
                                         rates to their higher bound rates
                                         to compensate for lost revenue. As
                                         a result, Commerce Department
                                         officials expected these changes
                                         to have minimal effect on trade.
                                         This dispute, which concerns the
                                         removal of Australian export
                                         subsidies to its sole automotive
                                         leather producer, was just
                                         recently resolved. Australia's
                                         manufacturer received a prohibited
                                         export subsidy of 30 million
                                         Australian dollars (about $22.3
                                         million) in 1997. U.S. domestic
                                         producers of automotive leather
                                         are concerned about competing with
                                         subsidized exports in the U.S. and
                                         world markets. U.S. industry
                                         estimates that the U.S. automotive
 24         Australia automotive leather leather market was $750 million in
            export subsidies             1999 and has been growing
                                         steadily. Although a WTO panel
                                         found in favor of the United
                                         States, the panel later ruled that
                                         Australia had not complied with
                                         the panel's decision requiring the
                                         repayment of the subsidy.
                                         Australia and the United States
                                         then negotiated a solution under
                                         which the subsidy recipient agreed
                                         to a partial repayment of the
                                         subsidy, and Australia agreed to
                                         exclude automotive leather from
                                         any future subsidies or subsidy
                                         programs.
                                         This dispute involved U.S.
                                         restrictions on imported shrimp
                                         caught in a way that did not
                                         adequately protect sea turtles. It
                                         had limited economic consequences
                                         for the United States. The United
                                         States imported over $3 billion
                                         worth of shrimp in 1998, about 89
                                         percent of the total supply of
                                         shrimp in the United States. The
                                         share of imports in total supply
                                         has actually risen since 1995
 25         U.S. ban on shrimp imports   despite the import restrictions
            to protect turtles           and decreased exports by some
                                         countries. Therefore, the
                                         restrictions have potentially
                                         affected the source of U.S.
                                         imports but not necessarily the
                                         overall size of these imports.
                                         Malaysia, which was not certified
                                         by the State Department as meeting
                                         the requirements for protecting
                                         sea turtles, saw its exports fall
                                         in 1997 and 1998, while Thailand,
                                         which is certified, has seen its
                                         exports rise.
                                         This dispute involved access to
                                         and investment in the Indonesia
                                         auto market by U.S. auto
                                         producers. Indonesia instituted
                                         several measures under its auto
                                         programs that discriminated
                                         against imports and provided
                                         benefits to domestic firms over
                                         foreign-owned producers. U.S.
                                         direct exports of autos and auto
                                         parts to Indonesia were only $2.1
                                         million and $38 million in 1998,
 26         Indonesia automobile and     respectively--less than 1 percent
            auto parts measures
                                         of U.S. world exports of these
                                         products. However, U.S. automakers
                                         had intended to invest
                                         approximately $750 million in
                                         Indonesia to integrate Indonesia
                                         into a wider network of production
                                         in Southeast Asia. Also, final
                                         products produced in Indonesia and
                                         the region would be marketed in
                                         Indonesia. Indonesia has complied
                                         with the WTO decision by modifying
                                         its auto regime.
                                         This dispute involved a change in
                                         the tariffs U.S. exports to the EU
                                         faced in 1995 on certain computer
                                         networking equipment and computers
                                         with multimedia capability. It had
                                         potentially large economic
                                         consequences for U.S. producers.
                                         Although the United States lost
                                         its challenge to the EU's increase
                                         in tariff rates, negotiations
                                         occurring at the same time on the
                                         Information Technology Agreement
            European Union customs       ended up leading to the removal of
 27         classification of computer   tariffs on January 1, 2000, on the
            equipment                    products involved. The European
                                         market for computer networking
                                         equipment totaled over $5 billion
                                         in sales annually, and U.S.
                                         companies accounted for more than
                                         half of the market. The United
                                         States had said that by
                                         reclassifying these products, the
                                         EU had raised the tariffs on
                                         certain equipment from 2 percent
                                         to 7.5 percent and on personal
                                         computers from 3.5 percent to 14
                                         percent.
                                         This dispute involved the EU's
                                         challenge to a 1987 U.S.
                                         antidumping order that had
                                         remained in place on imports of
                                         urea, a chemical compound used in
                                         fertilizers and animal feed, from
                                         regions of Germany formerly a part
                                         of the German Democratic Republic.
                                         Citing lack of U.S. industry
                                         interest, Commerce completed a
 28         U.S. antidumping order on    changed circumstances review and
            urea                         dropped the dumping order, thus
                                         ending the case. The original
                                         antidumping order placed a 44.88
                                         percent duty on urea imports from
                                         the German Democratic Republic.
                                         The U.S. International Trade
                                         Commission reported that imports
                                         of urea from the German Democratic
                                         Republic in 1986 were about $14.6
                                         million, or 2.4 percent of the
                                         over-$600 million U.S. market.
                                         This dispute involved access to
                                         the Philippine market by imported
                                         pork and poultry products. The
                                         United States challenged the
                                         failure of the Philippines to
                                         implement a tariff-rate quota
                                         system under its WTO obligations.
                                         The dispute was settled through
                                         consultations and a Philippine
 29         Philippines pork and poultry commitment in 1998 to administer
            tariff-rate quotas
                                         its tariff-rate quota system so as
                                         to improve access to its market.
                                         U.S. exports of poultry products
                                         to the Philippines increased from
                                         about $2 million in 1998 to about
                                         $18 million in 1999. U.S. pork
                                         exports also increased from about
                                         $1.4 million in 1998 to about $2.2
                                         million in 1999.
                                         This dispute involved a U.S.
                                         challenge to a Japanese
                                         requirement that individual
                                         varieties of fruits, such as
                                         apples, nectarines, and cherries,
                                         be inspected before entry into the
                                         Japanese market. The WTO agreed
                                         with the U.S. challenge, and Japan
                                         removed the ban on five varieties
                                         of apples and five varieties of
                                         cherries in July 1999. The
                                         Agriculture Department estimated
                                         that exports of these products
 30         Japan's measures affecting   could increase by $50 million as a
            fruit imports
                                         result of the removal of the bans.
                                         In December 1999 and March 2000,
                                         shipments of two varieties of
                                         apples entered the Japanese
                                         market. However, these and the
                                         other varieties still face costly
                                         inspection certification
                                         requirements (distinct from the
                                         varietal testing issue). The
                                         United States exported about $1
                                         million in fresh apples and almost
                                         $90 million in fresh cherries to
                                         Japan in 1999.
                                         This dispute involved an EU
                                         challenge to a U.S. change in its
                                         rules of origin, which affect
                                         imports of textile products. The
                                         EU contended that the change
                                         adversely affected its fabrics,
                                         scarves, and other flat textile
                                         products shipped to the United
                                         States by categorizing them as
                                         non-EU and thus subject to textile
                                         quotas. The United States and the
 31         U.S. textiles and apparel    EU settled the dispute in August
            rules of origin              1999, and the United States
                                         enacted legislation in May 2000
                                         that confers EU origin to certain
                                         products if they were both dyed,
                                         printed, and subject to additional
                                         finishing operations in the EU.
                                         U.S. imports from the EU of cotton
                                         or certain manmade fiber printed
                                         fabrics were over $7 million, and
                                         U.S. imports of silk printed
                                         fabrics were over $18 million in
                                         1999.
                                         This dispute involved
                                         discriminatory taxes that Korea
                                         leveled against imports of
                                         distilled spirits that competed
                                         with soju, which were domestically
                                         produced. It was a legal victory
                                         for the United States but had
                                         limited economic benefits. Korea
                                         complied with its WTO obligations
                                         primarily by raising the taxes it
                                         charged on soju to a rate equal to
                                         taxes on other distilled spirits.
                                         Tax rates on imported distilled
                                         spirits were lowered, but the U.S.
 32         Korea's taxes on distilled   industry contends that rates,
            spirits                      although nondiscriminatory, still
                                         remain too high to provide
                                         effective market access. The U.S.
                                         industry considers Korea a
                                         potentially large market for
                                         exports. However, U.S. exports to
                                         Korea of distilled spirits (about
                                         $1 million in 1999) represent less
                                         than 1 percent of all U.S. exports
                                         of these goods. Also, despite
                                         recent increases in U.S. exports
                                         since the Asian financial crisis,
                                         U.S. exports of distilled spirits
                                         to Korea still remain below 1996
                                         levels.
                                         This dispute involved improving
                                         the enforceability of intellectual
                                         property rights in Sweden. The
                                         successful resolution of this
                                         dispute may help to reduce piracy
                                         of software products, offering
                                         commercial benefits to U.S.
                                         producers. The U.S. business
                                         software industry was concerned
                                         about its ability to conduct
                                         surprise searches for pirated
                                         software. U.S. industry estimated
                                         that Sweden had sales of business
                                         personal computer application
                                         software of $313 million and a
 33         Sweden's civil procedures    piracy rate of 38 percent
            for intellectual property    (compared with Western Europe's
                                         average of 36 percent), resulting
                                         in $119 million in revenue losses
                                         in 1998. Worldwide, the U.S.
                                         industry reported revenues on
                                         business personal computer
                                         application software of $17.8
                                         billion in 1998 and estimated that
                                         it had lost about $11 billion to
                                         piracy that same year. The
                                         resolution of this dispute has
                                         also been useful in negotiations
                                         with other northern European
                                         nations that also did not permit
                                         the surprise searches the industry
                                         sought.
                                         This dispute involved a Korean
                                         challenge to a 1984 U.S.
                                         antidumping order on color
                                         television imports. Following a
                                         change in interest by U.S.
                                         industry, the Commerce Department
                                         revoked the duty. The original
 34         U.S. antidumping order on    antidumping order placed duties
            color television receivers   ranging from less than 1 percent
                                         to over 16 percent on imports of
                                         color television receivers from
                                         Korea. Imports from Korea
                                         accounted for $108 million in
                                         1982,
                                         2.8 percent of the $3.9-billion
                                         U.S. market.
                                         This dispute involved a U.S.
                                         challenge to India's use of WTO
                                         balance-of-payments provisions to
                                         justify import restrictions and
                                         bans. The WTO agreed with the U.S.
                                         challenge, and India began
                                         removing these restrictions. The
                                         barriers covered 2,700 tariff
                                         lines of goods, about one third of
                                         India's entire tariff schedule.
                                         Removal of such a large number of
                                         quantitative restrictions should
                                         provide greater market access for
 35         India's quantitative import  U.S. exporters. Under an agreement
            restrictions                 reached on implementation, India
                                         removed 1,999 of the 2,700 by
                                         April 1, 2000. The remaining
                                         barriers are scheduled to be
                                         removed by April 1, 2001. However,
                                         India negotiated with the United
                                         States increases in its bound
                                         rates on some agricultural
                                         products in exchange for greater
                                         access for others, according to
                                         USTR. Also, India may choose to
                                         increase some tariff rates up to
                                         their bound rates to compensate
                                         for the removal of the barriers.
                                         This dispute involved a Korean
                                         challenge of a 1993 U.S.
                                         antidumping order on dynamic
                                         random access memory
                                         semiconductors. The original
                                         antidumping order found that some
                                         Korean producers of certain
                                         semiconductors were selling their
                                         products in the U.S. market at
                                         less than fair value and caused
                                         material injury to the U.S.
                                         industry. Duties were imposed on a
 36         U.S. antidumping order on    portion of the nearly $730,000 of
            Korean semiconductors        imports from Korea in 1991. These
                                         comprised about 30 percent of all
                                         imports of dynamic random access
                                         memory semiconductors. Imports in
                                         turn made up about 71 percent of
                                         the $3.4 billion U.S. market. In
                                         response to the WTO panel ruling,
                                         although Commerce modified one of
                                         its revocation review procedures,
                                         it completed a review under the
                                         new procedure and determined that
                                         the antidumping duties should
                                         remain in effect.
                                         This dispute involved an EU
                                         challenge to a Department of
                                         Agriculture ban on imports of
                                         poultry products until
                                         negotiations on health and safety
                                         standards were completed. The ban
                                         was initiated in April 1997 and
                                         was removed in August following
                                         inspections of EU facilities by
                                         Agriculture. Agriculture officials
 37         U.S. ban on imports of       said that importers of the
            European poultry
                                         particular products affected were
                                         aware of the possibility of the
                                         ban and had increased inventories.
                                         Therefore, they believe the ban
                                         had very little impact on actual
                                         trade flows. U.S. imports of the
                                         poultry products affected were
                                         about $1,940,000 in 1997, down
                                         slightly from about $1,980,000 in
                                         1996.
                                         This dispute involved a U.S.
                                         challenge to Mexico's initiation
                                         of an antidumping investigation on
                                         U.S. exports of high fructose corn
                                         syrup, a sugar substitute. The WTO
                                         agreed with the U.S. challenge. A
                                         successful resolution of this
                                         case, which has not yet been
                                         completed, offers potential
                                         commercial benefits to U.S.
                                         producers. Following the
                                         imposition of duties ranging
                                         between 60 and 102 percent in 1997
            Mexico's antidumping         and 1998 on certain types of high
 38         determination on high        fructose corn syrup, U.S. exports
            fructose corn syrup          have fallen from a peak of about
                                         $63 million in 1997 to about $55
                                         million in 1999. However, both
                                         these figures are well above the
                                         $27 million (or less) the United
                                         States exported prior to 1996.
                                         U.S. exports of high fructose corn
                                         syrup command about 7 percent of
                                         the Mexican sweetener market
                                         (sugar and high fructose corn
                                         syrup), based on estimates from
                                         the U.S. Foreign Agricultural
                                         Service. Mexico has agreed to
                                         comply with the panel ruling by
                                         September 2000.
                                         This dispute involved a U.S.
                                         challenge to Canada's subsidies on
                                         exports of dairy products and
                                         limitations on market access in
                                         Canada for fluid milk. The
                                         commercial benefits of the
                                         successful WTO ruling for the
                                         United States are likely to be
                                         limited, but the case was
                                         important to deter any
                                         circumvention of the export
                                         subsidy reduction commitments on
                                         agricultural products. The
                                         Department of Agriculture
                                         estimated that the economic
                                         consequences of the reduction in
                                         Canadian exports of subsidized
                                         dairy products will be minimal
                                         since Canada accounts for less
                                         than 1 percent of dairy products
                                         traded internationally, and
                                         exports to the United States
                                         account for only 0.2 percent of
                                         U.S. milk production. Under an
 39         Canada dairy subsidies and   agreement reached with the United
            quotas
                                         States and New Zealand, Canada
                                         will comply immediately with its
                                         WTO export subsidy commitments on
                                         butter, skimmed milk powder, and
                                         an array of other dairy products.
                                         Beginning in the 2000-2001 market
                                         year, Canada will reduce its
                                         exports of subsidized cheese to a
                                         level that is less than half of
                                         the volume exported in recent
                                         years. The WTO also found that
                                         Canada was improperly implementing
                                         its tariff-rate quota on fluid
                                         milk. U.S. industry officials
                                         estimated greater access could
                                         bring an additional $45 million in
                                         sales to the U.S. dairy business.
                                         However, the two countries do not
                                         currently export fluid milk to
                                         each other (except in retail-size
                                         containers) because of ongoing
                                         work on developing equivalency
                                         measures on health, sanitation,
                                         and inspection standards.
                                         This dispute involved an EU
                                         challenge to U.S. tax laws that
                                         allowed exemption from taxation of
                                         a portion of income related to
                                         exports of foreign sales
                                         corporations. The WTO found that
                                         the U.S. measures were prohibited
                                         export subsidies. The United
                                         States has until October 1, 2000,
                                         to bring its laws into conformity
                                         with its WTO obligations. The
                                         United States has not fully
                                         determined how it will comply with
                                         the WTO ruling. The commercial
 40         U.S. tax treatment for       stakes of this dispute are
            foreign sales corporations
                                         potentially large. The foreign
                                         sales corporation tax provisions
                                         allow corporations a 15-percent to
                                         30-percent tax exemption on
                                         exports used abroad. The last
                                         Treasury report on the foreign
                                         sales corporations issued in 1997
                                         on taxable year 1992 data shows
                                         $152.3 billion in exports
                                         benefited from the exemptions,
                                         with an estimated revenue cost of
                                         the program of $1.3 billion and an
                                         estimated export gain due to the
                                         program of $1.5 billion.
                                         This dispute involved U.S.
                                         state-level actions that
                                         restricted access to the U.S.
                                         market of some Canadian trucks
                                         containing cattle, swine, and
                                         grain. The dispute was resolved
                                         through an agreement that suspends
                                         the actions but also seeks to
                                         improve market access into the
 41         U.S. imports of Canadian     Canadian market for animals and
            cattle, swine, and grain
                                         grains. The direct effect of the
                                         U.S. restrictions was limited, but
                                         the resulting agreement may
                                         improve access to the Canadian
                                         market. The United States imported
                                         over $1.4 billion from Canada and
                                         exported over $300 million to
                                         Canada of live cattle, swine, and
                                         grain in 1999.
                                         This dispute involved an EU
                                         challenge to the WTO consistency
                                         of U.S. section 301 trade law and
                                         related provisions. The case was
                                         important to the United States
                                         commercially since section 301 is
                                         used to address a wide variety of
                                         foreign trade practices with
                                         potentially large commercial
                                         values. However, USTR noted that
                                         since this dispute did not involve
 42         Provisions of the U.S. Trade a particular application of
            Act of 1974
                                         section 301, had the United States
                                         lost the case and had chosen not
                                         to comply, the EU might not be
                                         able to show any actual commercial
                                         damages to retaliate against. The
                                         United States brought a total of
                                         119 section 301 cases from 1975
                                         through August 1999. On average
                                         this amounted to about five cases
                                         per year, both before and after
                                         the formation of the WTO.

aMercosur, the Common Market of the South, was created in 1991 by Argentina,
Brazil, Paraguay, and Uruguay.

Source: GAO analysis.

Objectives, Scope, and Methodology

The Chairman of the House Ways and Means Committee requested that we review
the WTO's dispute settlement system, focusing on WTO member countries' use
of the system over the past 5 years. In conducting the work, we examined (1)
the outcome and commercial impact of completed cases involving the United
States and (2) the major issues that have emerged in using the system.

To evaluate the outcome and impact of cases involving the United States, we
examined 42 cases involving the United States that the Office of the U.S.
Trade Representative identified as completed as of March 16, 2000. Completed
cases included those that had gone through WTO litigation with a panel
and/or Appellate Body ruling and cases that were resolved without a WTO
ruling. Our analysis included subsequent actions taken on these cases as of
early July 2000.

To determine the impact of the cases on U.S. laws and regulations, and on
foreign practices, we identified those cases whose outcome resulted in a
change in laws, regulations, or guidelines or any change in administrative
procedures. We reviewed WTO dispute settlement documents including requests
for consultations, panel and Appellate Body decisions, and other documents
recording how the resolution of the cases was to be implemented. We also
reviewed U.S. Federal Register notices where appropriate, as well as
pertinent U.S. laws and regulations. We interviewed senior officials from
the Office of the U.S. Trade Representative, including the Assistant U.S.
Trade Representative for Monitoring and Enforcement, on the major issues and
outcomes of all 42 cases. Regarding particular cases, we also met with
senior officials from the Departments of Agriculture, Commerce, State, and
the Treasury, as well as the Environmental Protection Agency. We also spoke
with industry representatives, interest groups, trade attorneys, and
academics knowledgeable about WTO cases. To determine whether the cases
resulted in significant changes in U.S. laws and regulations, we primarily
considered the nature of the change--whether substantive or procedural--and
the degree to which the change impacted U.S. programs or U.S. trade. Our
assessment was based on our own analysis as well as that of the affected
U.S. agency and relevant interest groups and industry associations. To
determine the changes in foreign practices, we relied on WTO and foreign
government documents, as well as interviews with U.S. government officials
from the agencies previously listed. We did not conduct an independent
analysis of the foreign changes or confirm those changes with the individual
foreign governments.

To evaluate the commercial effects of the 42 cases, we examined the
available evidence for each case concerning the U.S. commercial interests
involved and the commercial consequences for the United States of the case's
resolution. However, we did not formally assess the economic impact on the
United States of each dispute's outcome. To present indicators of the
commercial interests involved in the disputes, we gathered information on
the market size, the level of investment, and the level of trade in the
cases. In categorizing cases as having potentially high commercial stakes,
we examined whether the case involved a high share of a particularly large
market, large duties or sanctions, or wider implications for U.S. trade and
trade policy. We also examined the trade barriers involved and the extent to
which they were or might be removed. In cases involving intellectual
property protection, we evaluated whether such protection had increased as a
result of the case. In addition, we examined changes in trade flows of
particular products after the resolution of a case.

To evaluate the commercial consequences of the cases, we also interviewed
senior government officials and industry experts with the Office of the U.S.
Trade Representative; the Departments of Agriculture, Commerce, Energy,
State, and the Treasury; as well as officials from the U.S. International
Trade Commission, the Patent and Trademark Office, and the National Marine
Fisheries Service. We used trade, market, and other data from the
Departments of Commerce, Energy, Agriculture, and the Treasury, as well as
the U.S. International Trade Commission, and the National Marine Fisheries
Service. When available, we examined government and industry group estimates
of the economic impact of the cases; however, we did not verify their
results.

To examine the major issues that have emerged during the first 5 years of
the WTO dispute settlement system, we reviewed U.S. government reports and
documents; legal texts and journals, and conference proceedings; and other
papers on WTO dispute settlement. In addition, we interviewed senior U.S.
government officials at the Departments of State, the Environmental
Protection Agency, the U.S. Department of the Treasury, and the Office of
the U.S. Trade Representative; representatives from the President's Advisory
Committee on Trade Policy and Negotiations; law professors; lawyers in
private practice; and representatives of several nongovernmental
organizations in the consumer, health, and environmental protection fields.
The focus of our inquiry was on identifying major concerns in the areas of
sovereignty, compliance, timeliness, and transparency as well as on
obtaining views on whether any of the 42 specific cases involving the United
States we examined confirmed or allayed these concerns. Regarding
sovereignty, the specific issue we addressed was the extent to which U.S.
participation in the WTO dispute settlement system affects the U.S.
government's actions in the health, safety, or environmental areas or with
respect to unfairly traded imports.

We conducted our work from March through July 2000 in accordance with
generally accepted government auditing standards.

GAO Contact and Staff Acknowledgments

Kim Frankena (202) 512-8124

In addition to the person named above, Anthony Moran, Shirley Brothwell,
Howard Cott, Juan Gobel, Mary Moutsos, Nina Pfeiffer, Richard Seldin,
Elizabeth Sirois, Tim Wedding, and Katherine Woodward made key contributions
to this report.

Glossary

Ad valorem is any charge, tax, or duty that is applied as a percentage of
value.

Antidumping measures include a duty or fee imposed to neutralize the
injurious effect of unfair pricing practices known as "dumping."

Applied tariff rates are the actual tariff rates WTO member countries
currently apply to imports.

Balance-of-payment provisions allow a WTO member to temporarily impose price
or quantity restrictions on imports when facing a serious decline or low
level of its monetary reserves in order to increase its foreign currency
holdings.

Bound tariff rates are most-favored-nation tariff rates resulting from GATT
negotiations and thereafter incorporated as integral provisions of a
country's schedule of concessions. The bound rate may represent either a
reduced tariff rate or a commitment not to raise the existing rate.

A copyright is an intellectual property right in an original work of
authorship that arises automatically upon creation of such a work and
belongs, in the first instance, to the author.

A countervailing duty is a special duty an importing country imposes to
offset the economic effect of a subsidy and thus prevent injury to a
domestic industry caused by a subsidized import.

De minimis dumping is the level below which a dumping margin or subsidy is
considered to be negligible. Antidumping or countervailing duty actions are
terminated in cases where the margin of dumping or level of subsidy is below
the de minimis level.

Dumping is the sale of a commodity in a foreign market at a lower price than
its fair market value. Dumping is generally recognized as unfair because the
practice can disrupt markets and injure producers of competitive products in
an importing country.

A duty is a tax imposed on imports by the customs authority of a country.
Duties are generally based on the value of the goods (ad valorem duties),
other factors such as weight or quantity (specific duties), or a combination
of value and other factors (compound duties).

An export subsidy is generally a subsidy that is provided on the basis of
export performance.

The Foreign Sales Corporation provisions of the U.S. Internal Revenue Code
provide an income tax benefit for exporting, permitting firms to exempt
between 15 percent and 30 percent of export income from taxation.

The General Agreement on Tariffs and Trade was created in 1947 as an interim
measure pending the establishment of the International Trade Organization,
which never came into being. Operating in the absence of an explicit
international organization, GATT provided the legal framework for
international trade, with its primary mission being the reduction of trade
barriers, until the advent of the WTO in 1995.

Patents, trademarks, and copyrights are the three primary forms of
intellectual property rights in worldwide use. They encourage the
introduction of innovative products and creative works to the public by
guaranteeing their originators a limited exclusive right, usually for a
specified period of time, to whatever economic reward the market may provide
for their creations.

Local content requirements are the most common form of trade-related
investment measures. They oblige an investor to purchase or use a specific
amount of inputs from local suppliers. Local content requirements are used
in an attempt to ensure that the investment increases local employment and
develops physical and human capital.

Most-favored-nation treatment is a principle of nondiscrimination that
commits all WTO signatories to extend the same treatment to all other
signatories.

National treatment is the act of treating a foreign product or supplier no
less favorably than domestic products or suppliers.

Most nontariff trade barriers are measures used at the border to restrict
the inflow of foreign goods. Major categories of nontariff barriers include
quantitative import restrictions such as quotas, voluntary export
restraints, and price controls.

A patent protects an invention by giving the inventor the right to exclude
others from making, using, or selling a new, useful, nonobvious invention
during a specific period of time.

Rules of origin are the criteria used to define where a product was made.
They are an essential part of trade rules because several policies of an
importing country, including quotas, preferential tariffs, antidumping
actions, and countervailing duties, vary depending on the exporting country.

A safeguard is a temporary import control or other trade restriction that a
country imposes to prevent injury to a domestic industry from import surges.
It is designed to facilitate the adjustment of domestic industries to the
influx of fairly traded imports.

Sanitary and phytosanitary regulations are measures taken to protect human,
animal, or plant life or health. WTO rules require these measures to be
based on scientific principles and not act as disguised trade restrictions.

Section 301 is a U.S. law providing the United States with the domestic
vehicle for pursuing redress against foreign policies or practices that
burden or restrict U.S. commerce.

Services consist of economic activities whose outputs are other than
tangible goods, including businesses such as accounting, advertising,
banking, engineering, insurance, management consulting, retail, tourism,
transportation, and wholesale trade.

A subsidy is generally considered to be a bounty or a grant provided by a
government that confers a financial benefit on the production, manufacture,
or distribution of goods or services. Government subsidies include direct
cash grants, concessionary loans, loan guarantees, and tax credits.

A tariff is a tax imposed on imported goods, sometimes used to raise
revenues or protect domestic industries from foreign competition.

A tariff-rate quota is the application of a lower tariff rate for a
specified quantity of imported goods. Imports above this specified quantity
face a higher tariff rate.

WTO members have the right to adopt the regulations, standards, testing, and
certification procedures they consider appropriate -- for example, for
human, animal, or plant life or health, for the protection of the
environment, or to meet other consumer interests. The WTO Agreement on
Technical Barriers to Trade is intended to ensure that such measures do not
create unnecessary obstacles to trade and to encourage countries to use
international standards.

Trade-balancing requirements allow an investor to import goods only up to a
specified amount, which is determined by the investor's locally produced
exports. Governments use such requirements to maintain or achieve a
favorable balance of trade.

Trade-related investment measures require specific behavior from investors
that affects trade. Trade-related investment measures are placed on foreign
direct investment (that is, investment in factories or businesses) by
governments in an effort to influence investment decisions such as the
sourcing of goods, the location of production, and the sites for markets;
and to increase the likelihood that the host nation will capture the
benefits expected from the investment. Trade-related investment measures can
be either mandatory or can take the form of an incentive for an investor.

Unfair trade practices include the dumping of an exported product below the
price charged for the same good in the "home" market of the exporter, or the
subsidizing of a product by a government.

The Uruguay Round resulted in an agreement establishing the World Trade
Organization. The Uruguay Round was the eighth and final round of
multilateral trade negotiations held under the auspices of the GATT. These
negotiations were initiated in Uruguay in September 1986 and concluded in
April 1994.

The WTO, which was established on January 1, 1995, as a result of the
Uruguay Round agreements, administers rules for international trade and
provides a forum for resolving trade disputes and conducting trade
negotiations. The WTO provides the institutional framework for the
multilateral trading system.

(711536)

Table 1: Completed WTO Dispute Settlement Cases Involving
the United States, 1995 Through March 16, 2000 30

Table 2: Commercial Outcome of WTO Dispute Settlement Cases
Involving the United States, 1995 Through March 16, 2000 96

Table 3: Commercial Significance of Completed U.S. Cases in
the WTO, 1995-2000 98

Figure 1: Flow Chart of WTO's Dispute Settlement Process 6

Figure 2: Areas Involved in 25 WTO Cases in Which the
United States Challenged Foreign Trade Practices 10

Figure 3: Areas Involved in 17 WTO Cases in Which Other
WTO Members Challenged the United States 12

Figure 4: Compliance With WTO Decisions in 42 Completed
U.S. Cases 22
  

1. See World Trade Organization: U.S. Experience to Date in Dispute
Settlement System (GAO/NSIAD/OGC-00-196BR, June 14, 2000). We also provided
testimony on these issues: see World Trade Organization: U.S. Experience in
Dispute Settlement System: The First Five Years (GAO/T-NSIAD/OGC-00-202,
June 20, 2000).

2. The agreement that governs this system is formally titled the
"Understanding on Rules and Procedures Governing the Settlement of Disputes"
and is generally referred to as the Dispute Settlement Understanding.

3. The WTO Secretariat, which provides technical and legal support to WTO
bodies and current and prospective members, maintains a list of governmental
and nongovernmental individuals nominated by WTO members as possessing the
requisite qualifications from which panelists may be drawn.

4. According to the Office of the U.S. Trade Representative (USTR), 42 cases
involving the United States had been resolved either through a panel ruling
or Appellate Body decision, a settlement between the parties, or some other
resolution, from the WTO's inception in 1995 through mid-March 2000.

5. This refers to measures used to protect human, animal, and plant health.
See Agricultural Exports: U.S. Needs a More Integrated Approach to Address
Sanitary/Phytosanitary Issues (GAO/NSIAD-98-32, Dec. 11, 1997).

6. See discussion on compliance later in this report for information on
compliance issues.

7. Section 301 of the 1974 Trade Act, codified at 19 U.S.C. sect. 2411,
addresses foreign unfair trade practices affecting U.S. exports of U.S.
goods or services and intellectual property protection.

8. Although the rulings of WTO panels and the Appellate Body do not
establish "precedents" as do judicial rulings in the United States and other
common law systems, decisions of the panels and especially the Appellate
Body do to some extent rely on previous rulings.

9. These provisions allow a WTO member to temporarily impose price or
quantity restrictions on imports when facing a serious decline or a low
level of its monetary reserves in order to increase its foreign currency
holdings.

10. Issues identified during the Uruguay Round negotiations are discussed in
The General Agreement on Tariffs and Trade: Uruguay Round Final Act Should
Produce Overall U.S. Economic Gains (GAO/GGD-94-83A&B, July 29, 1994).

11. Although the word "sovereignty" has varied meanings, as used in this
report sovereignty refers to how U.S. participation in the WTO dispute
settlement system affects the U.S. government's authority over its domestic
and foreign actions.

12. Specifically, the requirements of the WTO Agreement on the Application
of Sanitary and Phytosanitary Measures. U.S. consumer and health groups are
concerned that these requirements and their interpretation by dispute panels
could affect regulators in taking action against perceived health risks.

13. Section 102(a)(1) of the Uruguay Round Agreements Act, 19 U.S.C. sect. 3512
(a)(1) states that "[n]o provision of any of the Uruguay Round Agreements,
nor the application of any such provision to any person or circumstance,
that is inconsistent with any law of the United States shall have effect."
Section 102(c) precludes private actions challenging U.S. laws or
governmental actions as being inconsistent with the Uruguay Round
agreements.

14. Sec. 102 (b) and sect. 123 (f) and (g) of the Uruguay Round Agreements Act,
19 U.S.C. sect.sect. 3512(b), 3533 (f) and (g).

15. 22 U.S.C. sect. 3592(b)(2) was amended by a provision in the Trade and
Development Act of 2000 (P. L. 106-200, sect. 405).

16. Three of the 42 cases we examined involved complaints over U.S. section
301.

17. The average of 5.5 cases in the 1995 through 1998 period is also higher
than the 4.8 average during the entire 1975 through 1994 period.

18. During 1990-94, only 3 of 16 section 301 cases were referred to the GATT
for resolution; during 1995-99, 15 of the 24 section 301 cases were referred
to the WTO for resolution.

19. The panel stated that if the United States repudiated its assurances,
its conclusions that these provisions were consistent with U.S. WTO
obligations would no longer be warranted.

20. 15 U.S.C. sect. 72.

21. 42 U.S.C. sect. 7545(k).

22. Section 609 was one of the general provisions in the fiscal year 1990
Departments of Commerce, Justice, and State Appropriations Act, Public Law
101-162, 16 U.S.C. sect. 1537 note.

23. The Department of State implemented this particular change in guidelines
just prior to the WTO Appellate Body's ruling on the case, and environmental
groups say it weakens protection of sea turtles. State is periodically
reviewing whether the change in guidelines is causing nations to abandon
comprehensive conservation programs. So far this has not been the case.
Brazil and Australia are the only countries permitted shipment-by-shipment
entry. In addition, Thailand has been certified as having a comprehensive
conservation program, and Pakistan has just received U.S. certification.
Nevertheless, State's change in guidelines is currently being challenged in
the U.S. courts by U.S. environmental groups and a preliminary ruling
against State has been issued.

24. The dispute settlement understanding permits panels to consult with
experts, and panels have done so in some cases.

25. See Robert E. Hudec, Enforcing International Trade Law (New Hampshire:
Butterworth Legal Publishers, 1993), p. 290, table 11.10 and table 11.3, and
pp. 278-79.

26. As a result of the EU's failure to comply with WTO rulings on the EU's
ban on
hormone-treated beef and the EU banana import regime, the United States was
authorized to impose trade restrictions on $308 million worth of annual U.S.
imports from the EU.

27. Article 21 of the WTO Dispute Settlement Understanding states explicitly
that any disagreement about the sufficiency of implementation measures must
be resolved through dispute settlement procedures. On the other hand,
article 22 sets specific deadlines for requesting and receiving
authorization to retaliate, deadlines that could be missed if the review of
the sufficiency of compliance measures is still ongoing.

28. This occurred in the EU banana import regime dispute where the EU
attempted to block U.S. efforts to take retaliatory measures, insisting that
the procedure for authorizing retaliation can only occur after a review of
the sufficiency of compliance measures and must involve a whole new panel
proceeding. Subsequently, a WTO dispute settlement panel indicated that an
entirely new panel proceeding was not required and that the panel
determining the amount of retaliation can also assess the sufficiency of the
compliance measures.

29. For example, the United States challenged Australia's compliance with
the automotive leather export subsidy decision; the parties agreed to
reconvene the original panel to review Australian compliance. Also, the
United States and Malaysia agreed on how to proceed if efforts to resolve
Malaysia's concerns over U.S. implementation of the shrimp-turtle ruling
fail.

30. Public Law 106-200, 114 Stat. 251, sect. 407.

31. Rotation of products is intended to subject more products to higher
duties and increase uncertainty, thereby providing a greater incentive for
compliance.

32. Terence P. Stewart and Amy Ann Karpel, Review of the Dispute Settlement
Understanding: Operation of Panels, paper presented at American Bar
Association Symposium on The First Five Years of the WTO (Washington, D.C.:
Jan. 20-21, 2000).

33. 19 U.S.C. sect.sect. 3533, 3537. These include requirements for USTR to (1)
consult with appropriate congressional Committees (defined in the law as the
House Ways and Means and Senate Finance Committees), the petitioner, and
relevant formal private sector advisory committees; (2) consider the views
of interested private sector and nongovernmental organizations; and (3)
publish a Federal Register notice soliciting public comments whenever the
United States requests or receives a request for establishment of a WTO
dispute settlement panel or is subject to an adverse dispute settlement
ruling.

34. Section 301 addresses foreign unfair trade practices affecting U.S.
exports of goods or services, and intellectual property protection.

35. Co-complainants were Guatemala, Honduras, Mexico, and Ecuador.

36. Among other things, the Textile Monitoring Body was established to
supervise implementation of the ATC.

37. Split-run periodicals are periodicals sold both in Canada and abroad in
which Canadian editions contain advertisements for a Canadian audience.

38. Co-complainants were Argentina, Australia, Canada, Japan, New Zealand,
and Thailand.

39. The mailbox system preserves the novelty and priority of inventions
while the applicant waits for a patent.

40. Public Law 104-114, codified at 22 U.S.C. sect.sect. 6021 and following.

41. The act, Public Law 104-172, calls for sanctions against persons or
entities, including foreign persons or entities, that carry on certain kinds
of trade with Iran or Libya.

42. After the panel ruling, USTR and the U.S. Department of Commerce
announced an initiative to (1) review implementation of formal
representations made by Japan before the WTO dispute settlement panel
regarding the openness of its market to foreign film and its lack of
tolerance of restrictive business practices, (2) collect and assess data on
penetration by foreign film in Japan's distribution channels and retail
stores, and (3) issue a report on a semi-annual basis.

43. Mercosur, the Common Market of the South, was created in 1991 by
Argentina, Brazil, Paraguay, and Uruguay.

44. Argentina's statistical tax was intended to cover the cost of providing
general export and import statistical services.

45. The WTO panel did not rule on specific footwear duties because Argentina
had revoked the duties and replaced them with safeguard duties.

46. The Philippine regulations had been issued in response to a U.S. threat
to request negotiations under GATT 1994 regarding Philippine failure to
implement tariff rate-quotas for pork and poultry by July 1995, as called
for under its Uruguay Round commitments.

47. The products were apples, cherries, peaches and nectarines, walnuts,
apricots, pears, plums, and quince.

48. 19 U.S.C. sect. 3592.

49. Section 405 of the Trade and Development Act of 2000 (P.L. 106-200).

50. Foreign sales corporations are foreign corporations responsible for
certain sales-related activities regarding the sale or lease of goods
produced in the United States for export outside the United States.

51. 19 U.S.C. sect.sect. 2411-2420. These provisions address foreign unfair trade
practices affecting U.S. exports of goods or services.
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